The Political Economy of the Regional Allocation of Public Investment in Greece 1 976-2004

1. The Political Economy of the Regional Allocation of Public Investment in Greece1976-2004 Dr Yiannis Psycharis Assistant Professor Department of Planning and Regional Development, University of Thessaly, Greece

2. Aim of the paper The paper aims to examine the spatiotemporal development of the Greek Public Investment Budget over the period 1976-2001. The key issues addressed are: • The pattern of regional allocation of Public Investment in Greece • The temporal evolution of regional allocation of Public Investment in Greece • The determinants of regional allocation of Public Investment in Greece

3. The Major Determinants • Economic • Social • Political • Geographical

4. The geography of public finance • Public finance is involved with the three essential questions: • first, how is revenue raised, • second, how is public expenditure allocated to finance public goods and services, and • third, what is the balance between revenue and expenditure. • The geographical analysis of public finance places the emphasis on the spatial pattern of revenue-raising, the spatial pattern of public expenditure, and the spatial balance between revenue and expenditure. • In Britain, the debate over devolution has thrown up specifically spatial questions about the present distribution of public expenditure in order to determine who gets what, where.

5. Literature Review • Initial Contributions • Buchanan (1949), (1950), (1952) • Musgrave (1959), (1983) • Scott (1952), (1964) • Samuelson (1954) • Tiebout (1956) • Oates (1972), (1991) • Nordhaus (1975), (1989) • Bennett (1980) • Contemporary Contributions • Heald (1980), (1994), (1999) • Short (1978), (1981) • MacKay (1993), (1996), (2001) • Gramlich (1977) • Ladd (1990) • Anderson and Tollison (1991) • Wallis (1996) • Oates (1998), Collective Volume

6. Statistical Data and Sources • The Greek Public Investment Budget is part and parcel of the Greek Annual Budget. It forms a very important constituent of the Public Budget and of course is approved by the Parliament. • It brings the most updated time-series of primary data for the period referred above. The data have been deflated at constant 1970 prices. • They are broken down at the prefectural level. The year 2000 Ordinary Budget expenditure: 32.0% of GDP Public Investment Budget: 4.7% of GDP

7. GREECE’S TIERS OF LOCAL GOVERNMENT AND DECENTRALIZED STRUCTURES

8. The choice of Prefectures as the base Unit for our Analysis • 51 Prefectures (NUTS III level) • Prefecture is a key feature of the Greek political, administrative and planning structure and also the base unit for constituencies

9. Map of Greece

10. Periodising of the Post-dictatorial Greek Governments • 1976-1981New Democracy Party - LiberalParty • 1982-1989PASOK - Socialist Party • 1982-1985 PASOK- Socialist Party • 1986-1989 PASOK- Socialist Party • 1990-1993New Democracy Party - LiberalParty • 1994-2000PASOK - Socialist Party • 1994-1996 PASOK- Socialist Party • 1997-2000 PASOK- Socialist Party

11. Step towards to the European Integration • 1981Entry to European Economic Community • 1985-1988Mediterranean IntegratedPrograms • 1989-1993First Community Support Framework • 1994-1999Second Community Support Framework • 2000-2006Third Community Support Framework • 2001Entry to the European Monetary Union (EMU)

12. Financial Recourses of Greek Public Investment Budget lines Return

13. Funds 1976-1981: The establishment of the Democracy (New Democracy Party in Power)

14. 1982-1989: The Socialist Era (Socialist Party in Power) Funds

15. 1982-1985 & 1986-1989: The two Socialist Governments of the ’80s Funds

16. Changes in the spatial pattern between 1976-1981 and 1982-1989

17. 1990-1993: The return of New Democracy Funds

18. Changes in the spatial pattern between 1982-1989 and 1990-1993

19. 1994-2000: The return of the Socialists Funds

20. 1994-1996 & 1997-2000: The two Socialist Governments of the ’90s Funds 1994-2000

21. Changes in the spatial pattern between 1990-1993 and 1994-2000

22. The accumulation of Public Investment in Greece 1976-2001

23. Per capita Summary statistics

24. Overview • Observing the transitions in the spatial distribution of public investments in Greece during the 1976-2001 period, a circle appears to have been completed. • Beginning from an intensely centralizing pattern for the spatial distribution of public investment, during the 1970s, which gave priority to the country’s urban development poles and selectively to certain agricultural or moderately urbanized areas, we passed, in the 1980s, to an intensely decentralizing and redistributive model with certain “clear” exceptions. • This pattern was extended into the first years of the 1990s. • From the around the mid-point of the 1990s to 2001, a change came about in the regional distribution pattern for the country’s public investment, characterized by the spatial concentration of public investments on the dynamic development poles and axes of the country. This pattern continued to apply during the first years of the new century. Attiki, Thessaloniki and Achaia and the links between them have played a catalytic role in the evolution of this pattern.

25. Concluding remarks Summarizing four tentative conclusions can be drawn. • First, the level of underdevelopment of prefectures does not appear to have constantly and systematically constitute the principal criterion for the regional distribution of public investment in Greece during the 1976-2001 study period.

26. Concluding remarks • Second, the concentration of population and economic activity in the two large urban centres of the country acted catalytically on the regional distribution model for public investment in the country's prefectures. 50% of the country's population resides in Attiki or Thessaloniki, where 50% of the GDP is produced. Although per capita public investments in these two prefectures have fluctuated, in Attiki around average, and in Thessloniki below it, the absolute values have consistently comprised more than 30% and usually up to 45% of total public investment.

27. Concluding remarks • Third, the policy concerning the regional distribution of public investment that was followed throughout the study period does not seem to have been dictated by a higher-level strategic regional development plan. For this to have been the case the government should have been systematically monitoring and recording the public capital balance by department, noting potential gaps, the omissions, the inequalities and the needs and to distribute resources accordingly. Sadly, this was not the case. In contrast to this, the regional distribution of public investments seems to be dictated more by faltering, ad hoc interventions based on opportunistic and some times indeterminate criteria, rather than by coordinated interventions dictated by some well researched plan of recorded needs.

28. Concluding remarks • Last, but not least, the regional distribution of public investment seems to be related to the electoral geography. The electoral preferences of prefectures, even the area of origin of certain members of each government, seem to comprise explanatory variables for the regional distribution of public investment. Obviously this conclusion requires more carefully collected evidence, and cannot be generalized, but certainly, contribute to the better understanding of the regional distribution of public investments in Greece.

29. The End

30. Summary statistics Box plot

31. Regional Distribution of Public Investment per period

32. Regional Distribution of Public Investment per period Return Summary Statistics

33. Financial Recourses of Greek Public Investment Budget Return