Discussion Papers 2001.
Role of the Regions in the Enlarging European Union 17-24. p.
Role of the Regions in the Enlarging European Union
© Edited by Zoltan Gal, Pecs, Centre for Regional Studies, 2001
REGIONS AND REGIONAL POLICY IN
CENTRAL AND SOUTH-EAST EUROPE
Ivan Tiles
The world is developing towards integration. Only large economic monetary
and military integrations are able to keep pace in the worldwide competition.
To remain outside these large integrations means lagging behind. But simulta-
neously with the large movements towards integration, another process in the
opposite direction can be observed: the growing importance of regionalism, of
local and urban autonomy, the increasing demand for local identity, for local
diversity in a world of global uniformisation.
Both of these shifts represent a reaction to the exaggerated hegemony of the
nation state in the last century, which was the cause of so much misery and
tragedy in Europe. Regionalism is therefore of political significance. It means
to create countervailing power at different levels of society, in order to prevent
over-centralisation. It happened not by chance that regionalism played the most
important role in those countries after World War II, where totalitarianism was
just to overcome: in Germany, Austria, Italy and Spain.
Looking at these advantages one wonders, why the application of the princi-
ples of federalism is so slow and sluggish and why did the processes towards
disintegration prevail in many countries of Central and Eastern Europe. To
explain these phenomena, one has to consider the historical and political factors
of development.
Experiences of the past
Conditions for the development of regional identities were unfavourable in the
last 50 years. The states of Central and Eastern Europe were centrally planned
economies where all power was concentrated in the centre. The units of the
intermediate level had — in principle — their own councils, in fact, however,
they were but executors of central orders. As far as they had powers of their
own — and they had — it meant the deliberate redistribution of resources among
cities and villages within their jurisdiction. The principle of the system was:
servile execution of higher orders and arbitrariness towards the lower levels of
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I. 11les
administration. In this sense, regional party secretaries disposed over a very
significant power. The local population, however, regarded this power, rightly,
as arbitrariness and as instrument of self-enrichment. In some cases, however,
influential and agile regional and local leaders could bargain during plan nego-
tiations several favours for their respective jurisdictions.
Originally, most settlements and villages had their own local councils. In the
course of time, however a centralisation and consolidation took place. The
number of local councils was considerably reduced (it was partly a precondition
for the abolishing of the district level in Poland, Hungary and Romania). The
same process took place also in several Western and Northern European coun-
tries but its impact was much more devastating in the Eastern countries. Mu-
nicipalities of Eastern countries were, on the one hand, much more exposed to
administrative decisions, made in a distant other settlement and, on the other
hand, because, for people, having no car, under the given poor public transport
conditions, travel to the distant administrative centres was much more difficult
and tiresome.
The system of local governments and the role of regions
in the transformation
The nations of Central and South-East Europe lived for half a century (and
most of them even for much longer period) in an over-centralised system. It is
no wonder that "decentralisation" was the main slogan by transforming the
system of territorial administration and local government. These systems had
been fundamentally changed and most of the changes proved to be good,
promoting democracy, participation and efficiency. Some tensions,
malfunctions, however, could be seen after some years and now several
countries are facing some new challenges in territorial administration. The main
developments are the following.
The system of Soviet type councils had been changed everywhere for more
traditional European administration. It means that the tasks, functions, and re-
sponsibilities of central and local government were to be divided from each
other.
The sentiments against over-centralisation were directed not only against
central government, but also against regional and district level power. It was the
level of arbitrary decisions and directives most immediately felt by town and
village dwellers. Therefore, one of the main aspirations of new liberal legisla-
tors was to divest regional and district level authorities of their power. In the
Czech Republic regions had been abolished fully as levels of self-government,
only state administration remained in the regions and districts, in Slovakia,
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Regions and Regional Policy in Central and South-East Europe
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even this survived only on district level in the first years after the political
change. In Poland, voivodship councils were transformed to central government
offices with the voivode as their head, who was appointed by the central gov-
ernment. In Bulgaria, regions remained only as levels of central government
offices. In Romania — following the French model — an appointed prefect and
an elected council chairman acted parallel. In Hungary counties with elected
councils and chairman remained in place, with reduced competencies and par-
allel a "republican commissioner" had been appointed to regions comprising 2-
4 counties, to oversee whether decision making in local and county councils
was in accordance with the constitution.
The basic level of local government became everywhere that of the munici-
palities. Local governments represent a one level system. Municipality govern-
ments are nowhere subordinated to higher level (district, regional) govern-
ments. The real dimensions of local government autonomy, however, reveal
themselves in the system of finances. In this respect, there is a substantial dif-
ference between Central European countries (Poland, Czech Republic, Slova-
kia, Hungary) on the one hand, and Romania, Bulgaria on the other.
Two types of systems of municipalities emerged in the region. In the Czech
Republic and Slovakia most, in Hungary every village represents a municipality
and have a local government of their own. In all other countries municipalities
are composed of a group of villages, numbering 5 to 25. This system in the
three countries is a reaction to former imposed consolidations. Nevertheless,
too small local governments are also sources of some difficulties. Financial
resources are too dispersed, the economies of scale cannot be utilised, wasteful,
parallel investments can occur. The willingness to co-operate has been weak, at
the beginning, but, for now, most of the municipalities realised that common
efforts in certain cases are necessary and more efficient. Associations and alli-
ances of communes had been formed. Governments supported the formation of
these organisations by making membership a precondition of some supports.
The intermediate level
In the course of time, it has been realised in more and more countries that too
weak and too small intermediate level governments are disadvantageous for
regional development. Indirectly, it contributes to centralisation, since there is
no institution on medium level to countervail central power. The lack of ade-
quate organisations is hindering spatial planning at regional level and is an
obstacle of cross-border co-operation, since there is no competent partner at
regional level with whom to negotiate and come to an agreement. Territorial
reform of administration has been initiated, for now, in several countries:
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a) In Poland, the reform was prepared already in 1993, but after elections
the case was put off and was implemented finally after new elections and
change of government in 1998. According to the reform, instead of 49
smaller voivodships 16 larger ones were established with increased corn-
petencies and with an elected regional council and local government. Si-
multaneously the traditional lower regional units: districts (powiaty) have
been re-established. Reform means more local democracy, more auton-
omy.
b) In Slovakia, the reform, introduced in 1996, meant also larger territorial
units. Instead of 36 districts 8 regions have been established and within
them 79 smaller districts. But the regions are still small, so that groups of
regions represent NUTS II units (4), while the new 8 regions themselves
are defined as NUTS III units. Neither the old nor the new units have
elected local government, they are only administrative units of central
government.
c) In Bulgaria, from the l st of January 1999, the 28 districts have been re-
established, more or less in their former constituency. The former 9
larger regions have been consolidated into 6. The territorial-administra-
tive reform, however, did not change the principal status of regions
within the administrative system;
d) In the other countries (Czech Republic, Hungary, Romania) the advance
of reform is slow. In the Czech Republic the reform and the new
territorial units (14 regions) are already approved but its implementation
will be probably postponed from 1. 1. 2000 to 1. 1. 2001. One of the
major obstacles is strong local — first of all cities — government who do
not want strong regional authorities. But, sometimes, central authorities
are also reluctant to divest any competencies in favour of regional
governments.
Establishing competent regional units is on the reform agenda everywhere in
the Central and South-east European regions and implementation is — though at
different speed — in progress.
The role of regions in the European integration: process and the
tasks of accession countries
The European Union had been — and is until now, in fact — an integration of
nation states. The role of regions is, however, gradually increasing in this in-
stitutional framework. The factors, contributing to this increase are the follow-
ing:
Illés, Iván: Regions and Regional Policy in Central and South-East Europe.
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With the creation of the European Union, a new level of political, economic
and jurisdictional competencies emerged: the supranational Community level.
The further development of the EU takes place through the interaction of the
community and national institutions. In some cases, however, both are too far
from citizens. Furthermore, the size and power of nation states within the EU
are very different. The creation of a more balanced, decentralised level, less
burdened by security, currency and world-wide foreign policy issues and more
oriented towards daily-life-issues, like environment, infrastructure, social and
cultural services, seemed to be reasonable. Besides, it can serve as a
"counterbalancing" factor against excessive centralisation of power both on
national and supranational level, and represents an additional guarantee of de-
mocracy.
The fact that the role of structural policy within the European Union has in-
creased and that the largest part of structural instruments is being assigned and
allocated not to nations but to regions, makes the strengthening the role and
competencies at regional level unavoidable and necessary.
The constitutional structure of some countries within the community has
made it necessary to rethink decision-making procedures on European level.
There are now three federal states in the EU (Austria, Belgium, Germany),
where some of the decisions negotiated between the Commission and the na-
tional governments, in fact, do not belong into the competency of national gov-
ernments but into that of regional governments. The scope and number of such
competencies is increasing even in non-federal states like Spain and Italy. In
order to take this situation into account, the Maastricht Treaty prescribed to
establish the Committee of Regions, a new community institution where re-
gions, cities and local governments are represented.
Finally, the EU member countries, neighbouring the candidate countries are
federal (Austria, Germany) and regionalised (Italy) states, interested in the
growing role of regions on community level. Their position in this issue would
be weakened by the accession of a number of over centralised Central and
Southeast European countries with weak regional competencies. Therefore,
they are especially and vitally interested in promoting decentralisation, region-
alisation and democratisation in Central Europe.
The first step to be made in this direction was to define and delineate re-
gions in the candidate countries compatible to the system and nomenclature of
statistical territorial units (NUTS), applied in the European Union:
This first step has been made in all countries. The statistical office of the
European Union, EUROSTAT in Luxembourg, has made an agreement with the
national statistical authorities of the accession countries. According to this
agreement, NUTS 1, NUTS 2 and NUTS 3 territorial units have been defined,
respectively, in every country. As far as possible, these units coincide with the
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1. 11les
existing territorial administrative units. In cases, where no administrative units
exist on the respective level, they were composed of whole existing smaller
units.
Beyond statistics, however, these territorial units should play an important
role in regional development and planning. Most of structural instruments in
the European Union are assigned and allocated to regional units (mostly to
NUTS 2 and NUTS 3 units). This policy and practice makes it indispensable
that programming, planning, development financing and controlling, negotiat-
ing and supervising capacities should be established on this regional levels. It
doesn't mean necessarily, that these units should be territorial units of govern-
ment administration and that they should have elected local government. Even
in some EU countries this is not the case. However, the call for democratic
control and participation makes it at least desirable that levels and units of de-
velopment planning, programming, financing and supervising and those of gen-
eral administration and local elected bodies and authorities possibly coincide
Finally, preparedness for accession is as important at regional as on national
level. These countries usually have a well-trained professional staff in the
capitals while it is not the case in the provinces. Therefore, pre-accession in-
stitution building and strengthening support (ISPA) should be used, first of all,
for strengthening decentralised programming, planning, controlling and super-
vising capacities.
Structural instruments of the European Union and PHARE
Regional and spatial policy belongs to the competencies of national govern-
ments and not to that of the European Commission. There are, however, many
aspects of EU and Commission activities, which have a substantial impact upon
regional and spatial developments in the member countries. Most important of
them are certainly structural policies and the efforts to achieve economic and
social cohesion within the community.
Obviously, the reform of the European Union and of the structural instru-
ments had to face the problems of Eastern enlargement. The new candidates are
poor countries, with a GDP per head well below the 75% eligibility threshold.
That means: most of their area will be eligible for Objective 1 support. Three —
more or less confronting — aspirations are to be considered in the course of the
reform:
1) More developed, net contributing countries are not willing to pay more
into the community budget, rather they want to diminish their contribu-
tion;
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Regions and Regional Policy in Central and South-East Europe
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2) The present beneficiary countries of structural instruments do not want to
lose the support enjoyed so far;
3) New member candidates would like to receive their fair share of struc-
tural instruments. The "Agenda 2000" allocated a significant amount of
resources to the support of new member candidates before and after
joining the community. But, while, on the one hand, it is a really gener-
ous offer to associated countries, on the other hand, this allocation is still
less, than their share would be, if presently valid eligibility and allocation
principles and procedures would be strictly followed. Applying these
principles and methods to the associated countries — or only to those with
which negotiations have already started — one could arrive at the conclu-
sion that nearly half of the structural-cohesion instruments — after acces-
sion — should be allocated to regions of these countries, having together a
population of 63 million, all eligible for Objective 1 support. Alone Po-
land's share would be more than 30% of the resources devoted to Objec-
tive 1 support.
There are good justifications for smaller allocations than that. Experience
has shown that supports cannot be efficiently utilised, if they exceed the in-
vestment "absorption capacity" of a country. Therefore a new regulation had
been introduced: yearly supports from structural instruments should not exceed
4% of the GDP of the respective beneficiary country. Considering the present
calculations of "Agenda 2000", no candidate in the first wave of accession
would be affected by this restriction.
The system of structural instruments includes a lot of principles and re-
quirements, the application of which could contribute to the modernisation and
more efficient functioning of the Central and Southeast European economies,
independently from the sum of support allocated to them:
The principle of concentration might support the efforts of governments to
concentrate available resources of regional development to regions which are
really in need or which can utilise resources most efficiently, and to resist the
claims of regional lobbies to disperse the resources. According to the criteria of
the EU, all regions of accession countries are eligible for Objective 1 support,
while, at present, governments are supporting only those regions, which are less
developed in the national context. Compared to the present situation, the circle
of supported regions will be extended, even there is an imminent danger that
support will be used in more, and not in less developed regions (as the exam-
ples of Greece and Portugal are demonstrating this). The Commission should,
consequently, be keen on the regional allocation of support and should not al-
low its adverse concentration in the relatively more developed regions.
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Additionality means that EU resources are allocated not to substitute na-
tional resources for regional development but to complete them. Additionality
also means that EU resources could represent only a certain percentage of the
total expenditures of each individual project. The rest has to be financed from
national resources. Considering that the implementation of most projects need
several years, it means also that national resources should be guaranteed several
years in advance. Most Eastern countries do not prepare multi-year budgets, in
fact, frequently even annual budgets have to be modified during the year.
Authorities are therefore hardly in the position to guarantee national contribu-
tions for several years in advance. The second major problem is the collecting
of national contributions when national budget allocations are already distrib-
uted among different ministries and local governments. Ministries and local
governments are not always willing to contribute to projects co-ordinated by
other ministry and local government. It occurs frequently that, though the
amount of national contribution on, "macro" level is ensured, the financing of
the project still fails due to unwillingness to co-operate among different na-
tional authorities. In order to ensure national contributions, the reform of the
budgetary system is necessary in most of the accession countries.
The management of structural instruments would have an impact upon the
economies of accession countries beyond the programmes and projects that
they are supporting. The budgeting, controlling and supervising methods, ap-
plied in the management of structural funds, and the procedures applied to pre-
vent fraud and corruption could have a beneficial impact also in other spheres
of central and local government finances, of public-private partnerships and
could contribute to the establishing a more sound system of government fi-
nances.
Paradoxically, just the present critical economic processes imply the hope
that the idea of regionalism will prevail in Central and South-East Europe.
Since the political change, we are witnessing growing regional disparities
among and within the countries of Central and Eastern Europe. This process
takes even dramatic dimensions in some cases. The principal causes are lying
in the emergence of market forces, in the re-emergence of differences of former
experiences in market economy, and last but not least, in the impact of foreign
direct investment, the distribution of which is extremely uneven among
countries and regions. Central and Eastern European governments, facing
budget deficit, balance of trade deficit, inflation, foreign debt service and
recession, are not in the position to mitigate growing disparities through
budgetary means. It means that regions can rely mostly only on themselves and
on endogenous resources. But economic sovereignty will lead — sooner or later
— to more political and administrative autonomy as well.