Brussels, 20/09/2012 (Agence Europe) - The European regions are successfully limiting the damages caused by the European economic storm, as borne out by the 2011 figures compiled by Dexia Crédit Local and the Council of European Municipalities and Regions (CEMR); but for how much longer? With creeping re-centralisation and a fall in direct investment, the regions are in danger of losing their ability to activate any economic recovery.
Revenue and spending under control. In their report entitled “Subnational public finance in the European Union” Dexia Crédit Local and the CEMR analyse the state of subnational finances in the European Union. Frédéric Vallier, CEMR secretary general, concludes that “the situation is not dramatic” because with the exception of certain German regions and autonomous regions in Spain, “the regions do not have the right to finance their debt through borrowing”. In 2011, subnational public finance was able to keep its head above water despite the crisis and austerity plans. This is due to an optimisation of revenue and keeping spending under control. It results in a deficit that has slightly fallen from 0.8% of GDP in 2010 to 0.7% in 2011. According to the study, higher subnational tax revenue (5.5%) was the main reason why the funding needs of local authorities were lower. Improved tax revenue helped offset an almost 5% drop in transfers to local authorities from central governments. In total, subnational revenue was stable in 2011.
Dangerous loss of speed in investment. The same year, however, saw the local authorities compelled to cut their spending. This situation had a significant impact and painful effect on investment. Over a two-year period, direct investment fell by 14% and created a worrying situation. Vallier explained that “the regions are a lever for growth and development. The recovery cannot take place unless there are strong local development and investment policies in employment and mobility, for example”.
Recentralisation counter-productive? He added that this also depended on what room for manoeuvre and what capacity there was for providing resources for the regions. He pointed out that in Europe, states have a tendency to re-centralise policy and modes of funding in their quest for greater efficiency in the current economic context. Vallier considers that if the central state limits subsidies or finances itself through certain taxes it “runs counter to local development policy because the regions become tributaries of the state”. He would like the local authorities to be able to have direct access to structural funds, “without going through the state and for Europe to be able to intervene directly”. (MD/trans.fl)