Spain’s Regional Economic Imbalances and Development Policies
The Origins of Budgetary Imbalances
The key factor has been industrialization and resulting economic imbalances. These increased with the development of industry and tourism, prompting growth in the Basque Country, Catalonia, and the Balearic Levante. Madrid attracted capital to finance manufacturing and services. These imbalances are reflected in the GDP, per capita income, and infrastructure. Unsteady demographics were a result of the crisis in traditional agriculture and industrial development, leading to the transfer of populations from rural to industrial areas. Social imbalances arose as economically more developed regions became more populated and received larger social service allocations. Imbalances in power emerged because more developed areas became “central places,” while other areas became “peripheral areas.”
The New Model of Imbalance
The more developed areas exhibit:
- Expertise in tertiary sector economic activities.
- Technological availability.
- Highly qualified labor.
- Quality infrastructure and equipment facilitating communication.
Currently, Spain sees development axes in these areas: Madrid, Catalonia, Valencia, the Ebro Valley, the Balearic Islands, and the Basque Country. Axes in decline include declining industrial areas and the Cantabrian Coast. The less developed areas are Extremadura, Castilla-Leon, Castile-La Mancha, Galicia, Andalusia, and Murcia.
Regional Policy
Regional policy began with development plans based on promoting industry in backward areas. The results were meager. The goals attempted were territorial solidarity, the establishment and development of Autonomous Regions, and accession to EU objectives to achieve balanced regional development and empower disadvantaged regions. The strategy to achieve this is based on:
- Consolidating the growth of Madrid, the Ebro Valley, and the Northern Mediterranean.
- Arresting the decline of the Cantabrian region.
- Driving development on the southern Mediterranean coast.
- Supporting other regions.
The instruments used are funds from EU regional policy incentives and the Inter-territorial Compensation Fund.
Funds from the European Union
Structural Funds are earmarked for the development of backward areas and the promotion of human resources. The funds utilized are: ERDF, FIFG, EAGGF, and ESF. Community Initiatives are special programs from the European Commission to solve major problems concerning the EU. The Cohesion Fund provides aid to less affluent countries, financing environmental projects and transportation networks.
Impact of EU Accession
The impact of Spain’s accession to the European Union has been:
- A transfer of sovereignty to the European Union.
- Receipt of substantial Community aid.
- A contribution to the reduction of regional imbalances.
The enlargement of the EU to include less fortunate countries may result in a decrease in the amount of aid received.
Regional Policy Incentives
These incentives aim to achieve firm competitiveness and inter-regional solidarity. This is accomplished through two instruments: investment in infrastructure and equipment, and compensation for investments in disadvantaged areas. There are three types of areas:
- Economic Development Zones: These are the least developed areas.
- Areas of Industrialization in Decline: These are most affected by the industrial crisis.
- Special Areas: These can be created by the government if special circumstances exist.
Interterritorial Compensation Fund
Revenues for this fund come from the general state budget. It supports regions with per capita incomes below the national average.