The Impact Assessment Office of the Senate of the Italian Republic published the research report “Spending for Growth? 30 years of EU policies for deprived areas: the impact of cohesion in Italy and Europe” made in collaboration with the Italian Association of Regional Science (AISRe) and the Institute for finance and the Local Economy (IFEL) of the Anci. The document consists of results on this topic, conducted by numerous researchers in Italian and foreign universities, including the authors of this article.
As stated in the report: In terms of financial commitments, geographical extension and timespan, the European Union’s Cohesion Policy has been one of the world’s largest place-based programs for redistributing wealth among regions and for stimulating growth in areas where development has lagged behind. With €352 billion in structural funds for disbursement over the seven- year period 2014-2020, of which €46.5 billion was earmarked for Italy, it is the cardinal policy for EU action. Its detractors, however, increasingly view it as a huge waste of resources, exacting high costs in terms of efficiency and economic growth. Criticisms have also been levelled – particularly in countries that make the highest contributions – at the centralization of funds for being costly and consistent. These criticisms are not wholly without foundation: after more than thirty years of interventions, economic and social inequalities within the Union yet to be eliminated. On the contrary, they are one of the factors behind a weakening of unity and stability”.
From our point of view, the document presents two relevant aspects. The first is that the studies reported in the document concern various European experiences, including Italy. Furthermore, in this document the question of the effectiveness of policies is rightly posed in problematic terms that take into account the complexity of cohesion policies, even though this aspect may appear to be a limit for those – detractors or supporters – who prefer easy and immediate simplifications and that are in search of clear answers (yes/no, effective/not effective).
As mentioned above, the Cohesion Policy is one of the most important European policies, an almost unique experiment worldwide. It is complex because it articulated many measures, is regulated in a very detailed way, and destined to multiple actors present in very different territories. For these reasons, the results obtained are very heterogeneous, varying both from region to region and the type of measure implemented.
However, this policy is fully included in the institutional context of the EU. It suffers, for example, from the incomplete process of European integration in which a unitary monetary policy was implemented (at least within the Eurozone) but a single fiscal policy is still lacking. This absence means that the adjustments to the negative shocks that affect individual regions fall on the cohesion policy, which by its nature has a structural, rather than a countercyclical, connotation (recall that it is planned over a long period, seven years).
Since the Cohesion Policy is a multi-level policy, i.e. based on the partnership principle that involves European, national, regional and local institutions in planning, and in the implementation of European projects, it is reasonable to suppose that its results depend on the qualitative level of the institutions involved. It follows that the effects vary according to the member state in which the policies are implemented. For example, while Germany is the country where regional policy has had the greatest impact on regional growth, in Italy the use of European funds has produced more limited effects.
More generally, the territorial context, or territorial capital, in which the policies themselves are directed, matters for the effects of such policies. Territorial capital, a measure of the capacity of the social environment to incorporate these policies, is however comparable to the fertility of a land, which the policies themselves could and should increase.
These aspects could explain why a non-linear relationship exists between the amount of funds used and the effects obtained. By increasing the amount of funds beyond a certain limit, the incremental benefits become almost nil. From this the possibility derives of increasing the overall effectiveness of the Cohesion Policy by transferring resources from territories that have reached the maximum capacity to absorb the resources themselves, towards other territories that are in deficit.
In the Italian case, Cohesion Policy must be considered together with the other policy measures because the criterion of additionality ceases over the years. it has gradually replaced these policies. In fact, it emerges from some studies reported in the report (and in particular by Coppola et al., 2018, EU and Nationally Based Cohesion Policies in Regional Regions) that the amount of European structural funds allocated to a region is correlated negatively with public investments. Furthermore, while current account subsidies and national cohesion funds react to purely cyclical GDP fluctuations, this does not happen for European structural funds, which are bound, in confirmation of what has been said before, by a seven-year planning cycle.
Indeed, European structural funds have become the main instrument in Italy capable to reduce territorial gaps, and in particular to solve the problem of less developed regions of the Mezzogiorno. Although the use of European funds may comparatively have a relatively weak impact on economic growth in Italy, it appears from Coppola et al. (2018) that they have a significantly greater impact than nationally based regional and industrial development policies. Furthermore, the quality of the institutions seems to affect the effectiveness of the structural funds much less than is the case for those few national policies that have any effect. This can be explained by the fact that the rigidity present in the planning, use and control procedures of the structural funds protects them from potentially harmful environmental influences.
Summing up, the Cohesion Policy of the European Union, even if problematic and producing relatively weak effects in Italy, is the main policy tool for tackling territorial inequalities in our country. In particular, it is necessary for the South, that is for that part of Italy, in which twenty million Italians live, which most of all suffered from the effects of the recent economic crisis.
The need for this policy and the importance of territorial and institutional aspects have important implications for future. Precisely because the effects of this policy are context-dependent, it is important to actively participate in the definition of the governance of the next programming 2021-2027. This implies a sense of responsibility from all the institutions involved.
Gianluigi Coppola is Lecturer in Economics at the Department of Economic Science and Statistics, University of Salerno, Italy (photo featured above).
Sergio Destefanis is Professor of Economics at the University of Salerno, Italy. He graduated with a PhD at Cambridge, UK, and has been awarded the Tarantelli and Banco di Napoli prizes. He was president of the Italian Association of Labour Economics from 2010 to 2013.(photo featured below).
Are you currently involved with regional research, policy, and development, and want to elaborate your ideas in a different medium? The Regional Studies Association is now accepting articles for their online blog. For more information, contact the Blog Editor at RSABlog@regionalstudies.org.