How the European Union Affects Domestic Institutional Capacities

This paper aims to explain the institutional impact that the European Union’s Regional Policy (EURP) had on Greece, by adopting a conceptual framework based on the theories of Europeanisation and implementation. The four principles that govern the operation of the programmes – partnership, programming, concentration and additionality – as well as the management tools that are implicit in those principles provided the stimulus for the changes in the domestic institutional system.

However, it seems that despite the significant changes that have taken place in the patterns of policy-making in this particular policy area, the previously established characteristics of the Greek political and administrative systems have changed very little. The argument is that the introduction of the mechanisms for the governance of the EURP has led to partial and superficial reorganisation of the institutional authorities involved.

In particular, the centralising tendencies of the Greek state and the reluctance of the central government to devolve any significant responsibilities to lower levels of government are postulated as the main factors that have impeded more substantial institutional changes from taking place. Thus, although there has been undoubted progress in the fields of policy orientation, the institutional structures that were supposed to promote the effective use of the Structural and the Cohesion Funds continue to follow old practices.

Hence, the country seems to have adapted the requirements set out by the principles that govern the EURP in a selective and formalistic manner. 1 This paper draws on parts of my PhD thesis conducted at the University of Sussex. I would like to thank my supervisor Francis McGowan for helpful comments made in different parts of the thesis as well as my two examiners –John Bachtler and Peter Holmes- for their constructive remarks. Any errors or omissions are mine. European Policy Research Paper, No. 79 iii European Policies Research Centre.

How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy European Policy Research Paper, No. 79 iv European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy 1. INTRODUCTION Greece has been one of the four original Cohesion countries that benefited substantially from the funding that arrived from the European Union’s Regional Policy (EURP).

The first rounds of Integrated Mediterranean Programmes (IMPs) were followed by three rounds of coordinated assistance in the form of three Community Support Frameworks (CSFs). Contrary to what is assumed in the popular accounts of the EURP, the policy does not simply entail redistribution of funds from the rich EU member states to the poor ones. Instead, it comes with significant elements of conditionality that are encapsulated in the four principles that govern the operation of the programmes, as well as a series of management tools that are implicit in those principles.

Both the principles and the management tools constitute the tangible effects that the participation in the EURP entails for the domestic administrative and political systems of the member states. The principles of concentration of resources available, partnership between state and non-state stakeholders, additionality between the domestic and the EU funds and programming provide the regulatory framework that the recipient countries need to apply.

Moreover, the management tools such as project selection, evaluation, monitoring, performance reserve and financial control attach further conditionality to the manner in which the recipient countries implement the EURP programmes. In theoretical terms, the traditional theories of EU integration have attempted to identify the nature of the process of political integration between the EU countries. The main conceptual cleavage has been between those that view the EU as solely an intergovernmental affair and those who view it as entailing significant supranational elements.

2 During the 1990s, a series of middle range theories developed that attempted to supplement these traditional theories by accounting for the role that other mediating factors may play in the interplay between the member states and the EU. 3 Broadly influenced by neo-institutionalism, they attempted to provide additional levels of analysis by taking into account previously existing institutional and organisational elements at the domestic level of the member states.

Two of these theoretical frameworks are those of Europeanisation and implementation of the EU policies. 4 They both share an interest in the manner in which the common EU policies are applied at the domestic level and the impact that they have on the domestic governance structures. The aim of this paper is to employ a conceptual framework based on these two theories in order to account for the institutional impact that the EURP has had for the case of Greece.

The main argument is that despite the opportunities offered by the introduction of the administrative framework for the management of the EURP programmes but also the domestic territorial reforms that took place during the last two decades, previously established patterns of administrative and political practices seem to have been partly 2 Wallace et al. 2010. 3 Lardech 2010. 4 The theories of multi-level governance are usually also cited in this context. For example see Bache, 2008. European Policy Research Paper, No. 79 1 European Policies Research Centre

How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy responsible for the limited effects of the policy. The paper is structured as follows; in the next part the main parameters of the conceptual framework are identified. The theories of Europeanisation and implementation of EU policies are discussed, followed by an attempt to compare the conceptual elements that these theories share and to elucidate the elements that I employ in the paper.

The next section discusses the institutional arrangements that existed in order to support the implementation of regional development policies prior to and immediately after the introduction of the first IMPs in 1986. The next part includes a separate discussion about the same issues, this time for the first two rounds of CSFs that lasted between 1989 and 1999. The introduction of the third CSF in 2000 signalled the establishment of a separate administrative framework for the management of the EURP funds.

This was accompanied by the introduction of significant territorial reforms that were initiated at the domestic level. These issues are discussed in the fourth section. The fifth part attempts to bring together the elements of the conceptual framework that I employ in the paper with the empirical information that I presented in the three parts that followed. The final part concludes and attempts to offer certain solutions that could be used in order to improve the institutional impact of the EURP in the current programming period (2008-2013).

2. THE CONCEPTUAL FRAMEWORK On the whole, the study of EU integration is conducted by those theorists who view the EC/EU as a product of negotiations between sovereign member states and those who theorise it as a distinct supranational entity that enjoys significant leeway for autonomous action from the constraints of the member states. 5 In the first case, 6 European integration is driven by the interests of the participating countries, which have created a supranational organisation with functional characteristics and responsibility in areas of ‘low politics’.

In the latter, 7 the project of European unification is viewed as a distinct case of the creation of distinct supranational functional interests which in the future could take a discrete form. Usually, the former contributions arrive from the field of International Relations (IR) whilst the latter employ methodological tools that are usually associated with comparative politics and public policy. The discussion about the roots and the impact of the project of European unification has contributed significantly towards an understanding of the unique political experiment which is the EU.

However, it suffers from a series of weaknesses: firstly, it fails to account for the role that other mediating factors play in the interplay between the member states and the EU. 8 The assumption that on the one hand the member states are passive pawns that adopt activities stemming from the EU or conversely that the EU becomes uniformly influenced by the countries that participate, regardless of their national histories and cultures, is difficult to accept. In order to compensate for these shortcomings, a number of 5

Rosamond, 2000; Dinan, 2000; Wiener and Diez, 2003; Wallace et al. , 2010. 6 Moravcsik, 1993; 1998. 7 Sandholtz and Stone Sweet, 1998. 8 Kassim et al, 2000; Warleigh, 2006; Ladrech, 2010. European Policy Research Paper, No. 79 2 European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy middle range theories, broadly influenced by neo-institutionalism, have been developed in the last fifteen years.

Their conceptual objective is not to disregard the traditional theories of European integration but rather to supplement them by providing additional levels of analysis and also explanatory frameworks. Two of them are discussed in this context: firstly, the approaches that are broadly included under the rubric of Europeanisation and secondly those of implementation of EU policies. The former are discussed in the remaining of this section. 2. 1 Europeanisation.

Europeanisation is a relatively recent addition to the theoretical literature on EU Studies, embracing both the process of European integration and the dynamics of European social and political change. The starting point of the arguments employed by the writers that employ these theories is that since the European integration is currently established in specific areas, the theoretical justification for examining only the supranational elements of that cooperation is not always obvious.

They suggest that we cannot ignore the fact that for many countries the external pressures emanating from Europe –through the EU- exist and the EU has a direct influence on these countries' domestic political and institutional developments. Therefore, they propose a conceptual framework that is sensitive to this reality and examines the influence that domestic mediating factors play in the relationship between the domestic and the supranational levels. 9 An extensive account of the theoretical discussions that have been proposed in this area falls outside the scopes of this paper.

10 It could be generally argued however that the principal theoretical and empirical aim of these studies is to capture the impact that the membership in the EU has on different domestic institutional spheres. The national parliaments, party systems, patterns of interest intermediation, state structures and territorial relationships are some of those institutional spheres. 11 Furthermore, it is obvious that there are two issues that seem to be common in these discussions. Firstly, that there is little convergence amongst the member states as far as their adaptation in the common EU policies is concerned.

Instead, divergent outcomes in what is considered common regulatory influences emanating from the EU are the norm. Secondly, the precise outcome of these interactions seems to be dependent on the ‘goodness of fit’ between the supranational requirements and the pre-existing domestic political and institutional practices. The EURP is the policy that entails specific and tangible impact of Europeanisation through the introduction of the common regulatory framework that guides its activities; hence, it has gained prominent attention in these debates.

In this context, Leonardi, 12 offers a conceptual framework that aims at addressing the possible responses of the domestic national and sub-national governmental authorities to the structural funding of the 20002008 period. He distinguishes between three types of possible administrative responses, 9 Kassim et al, 2000; Bulmer and Lequesne, 2005; Warleigh, 2006. 10 See Cowles et al. 2001; Heritier et al. 2001; Olsen 2002; Featherstone and Radaelli 2003, Graziano and Vink 2007. 11 Ladrech, 2010. 12 2005. European Policy Research Paper, No. 79 3.

European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy namely negation, adaptation and learning. In the case of negation, the domestic administrative authorities reject the rules and regulations that are attached as requirements for the implementation of the programmes. This is not necessarily an ‘irrational’ response as it could be justified in accordance with previously embedded internal administrative and political practices.

The costs of internalising the norms and procedures inherent in the new regulations outweigh the benefits, hence the negative administrative attitude. The impact of this will be minimal socioeconomic growth even though that comes as an unintended consequence of the practice of negation. The process of adaptation of the rules and regulations entails a passive incorporation that aims at as little administrative innovation as possible. The relevant national and regional authorities adopt the processes in an incremental manner and they attempt to ‘compartmentalise’ any institutional effects into a narrow administrative area.

What is important in this case is for the authorities to be seen to adopt the regulations in a constructive manner even though the reality is different. In practice, there is limited usage of methods of regional planning, management and reporting procedures, resulting in the partial expenditure of the funds. The socioeconomic impact of the policy is more significant than in the previous case, albeit not as important as it was initially aimed to be. Finally, in the case of learning, the domestic national and regional authorities fully comply with the new rules and regulations and try to take full advantage of the structural spending.

The new rules are internalised by the relevant bureaucracies and trickle down to other collaborating administrative agencies. The policy results in an increased institutional capacity, stemming from substantive changes taking place both at the individual and the structural level of the actors involved. There is a healthy collaboration between the national and sub-national policy actors with their Commission counterparts, and most importantly, meaningful partnerships develop with socioeconomic actors.

As a result, the policy achieves most of its objectives in terms of job creation, increased private investment and output growth. A useful sketch of the possible responses in the EURP principles and management tools is presented in the Figure 1. European Policy Research Paper, No. 79 4 European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy Figure 1 Source: Leonardi, 2005, p. 81 2. 2 Implementation of EU policies.

The theories that examine the patterns of implementation of the EU policies by the member states aim at explaining the divergence in the application of the directives and regulations that govern the activities of the EU by some member states. In other words, the initial question in that line of enquiry is fairly straightforward: what happens to the decisions taken by the EU Council, the Commission and the European Parliament, or all of them – in those areas in which methods of co-decision apply – when they are to be transposed to national laws?

Since the legal capacity of the EU to enforce that legislation, either via the Commission or the European Court of Justice (ECJ) in cases of infringement, is limited in particular policy areas (notably the Competition policy), it is mostly up to the national authorities to enforce the legislation. By definition that process has direct implications about the patterns of enforcement of the common EU policies with the EURP being one of them. This is the case especially since much of the legislation that governs the EURP is deliberately left to the discretion of member states in order to take account of specific regional and local circumstances.

13 13 Treib, 2008, p. 5. European Policy Research Paper, No. 79 5 European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy After a relatively late start, the studies that examine the patterns of enforcement of EU legislation by the member states have grown considerably in the last twenty years. 14 As with the theories of Europeanisation, an extensive discussion of the theories of implementation falls outside the scope of this paper.

15 Nevertheless, it is important to attempt a presentation of the theories that inform the empirical material presented in the rest of the paper. To start with, Cini 16 discusses the implementation of EU policies with reference to the distinction between two types of implementation theories, which in turn determine the political actors that are mainly responsible for the perceived implementation problems. In particular, she distinguishes between the top-down as opposed to the bottomup perspectives of the causes of the implementation deficits.

This follows the dichotomy attempted by the traditional theories of implementation which identify similar processes in operation in every policy field. 17 Following a similar line of enquiry, Lane 18 and Parsons 19 distinguish between two models of theories of implementation – albeit not in the EU context – as those of top-down and bottom-up. Lane furthers his analysis by pointing out that implementation is not similar to the evaluation of outcomes of a policy intervention.

Rather, it implies a process which is not easily measurable but must be constantly revisited during the policy cycle. It can come up as a result of both ‘control and hierarchy’ 20 in the top-down model and ‘exchange and interaction’ 21 in the bottom-up one. Dimitrakpoulos and Richardson 22 also stress the importance of conceptualising implementation as a process rather than a set of outcomes, and argue that this is pertinent for EU policy making in particular.

Nevertheless, they conclude that the perfect implementation of a programme is not only unfeasible but also unnecessary. Implementation is a complex process and is influenced by so many factors that it is normal that the outcome will deviate significantly from the ideal type set out. Finally, a report on the implementation of the Structural Funds, commissioned by the European Commission, 23 places implementation in a broader policy cycle, as depicted in Figure 2. It defines implementation as the process that generates ‘the operational processes to produce expected outputs.

’ It is the intermediary stage between on the one hand the identification of the problem that a policy action is supposed to solve, and the allocation of the funding and the results that are produced on the other. It also stresses the importance of ‘embedding’ the process of implementation in the wider socioeconomic and political context in which it takes place. It describes the process as ‘frequently mundane, 14 ibid 15 See the review article by Mastenbroek, 2005, as well as Falkner et al. , 2005 Sverdup, 2007 and Treib, 2008 for useful accounts of the relevant literature.

16 2003 17 Treib, 2008. 18 1993, p. 90 19 1995, p. 470 20 ibid, p. 106 21 ibid 22 2001, p. 336 23 OIR in association with LRDP and IDOM, 2003. European Policy Research Paper, No. 79 6 European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy incremental, and the subject of bargaining and negotiation’, concluding that the policy programmes ‘are in fact open systems that react and interact with a reference context.

’ 24 Figure 2. The Policy Cycle Identification of the Problem Evaluation of Results Formulation of Solutions Implementation Decision on Finance Source: OIR in association with LRDP and IDOM, 2003, p. 11 2. 3 Combining elements from the theories of Europeanisation and the implementation of EU policies The theories of Europeanisation and implementation of EU policies share many conceptual and empirical aims. Indeed, Borzel and Risse 25 postulate that the latter are the predecessors of the former.

The first characteristic that both the theoretical discussions share is an interest in the domestic impact of the EU policies whilst they are less interested in developments at the level of ‘Brussels’. They see European integration as encompassing policy competences in enough areas so as to influence patterns of everyday decisionmaking at the national and the sub-national levels. Moreover, they both propose institutional explanations in order to describe the degree of discrepancy between what is required by the EU regulations and the domestic norms and practices.

Therefore, they do not account for these discrepancies with reference to ‘veto players’ that block the enforcement of EU rules and norms. Instead, they are more interested in explanations that capture the multiplicity of institutional and political factors that are involved in national policy-making. Thus, there is more attention in the role that domestic mediating factors play in the creation of the outcome of the interaction between the supranational the national and the regional levels. 24 ibid. 25 2007, p. 484

European Policy Research Paper, No. 79 7 European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy At this point it must be pointed out that part of the literature that discusses the implementation of EU policies has focused on the enforcement procedures by employing the widely available data on the Commission’s infringements procedures against member states with the empirical aim of measuring the level of non-compliance.

26 Nevertheless, the focus in the paper is more on implementation as a process rather than sets of outcome and the explanation is almost exclusively institutional. This is not to say that the research avenue that compares the requirements set out by EU documents with the legislative outcomes at the national level is unimportant. Nonetheless, the paper aims at identifying the issues of capacity that explain the limited effect that the EURP has had on the domestic structures of the country discussed.

The argument that I put forward is that despite the participation in the EURP offered substantial opportunities and indeed promoted change in the domestic institutional practices, previously established characteristics seem to have cancelled these effects. These problems seem to have been more evident at the stage of the implementation of the programmes funded through the EURP. No political or administrative actor in Greece seems to have doubted the importance of the funds for developmental purposes.

Nonetheless, when it came to the phase of putting the programmes into practice previously existing practices overrode any concerns about the need to comply with the EURP regulations. Thus, I conclude that in accordance to the conceptual framework proposed by Leonardi, 27 the domestic authorities seem to have applied the four principles and the management tools implicit in the EURP in a selective and formalistic manner. The aim seems to have become the absorption of the available funds at a rate that would not entail the imposition of any penalty by the Commission.

Hence, any changes in institutional terms have been minimal and especially the programming aspects of the regulatory framework initiated by the EURP were hardly justified. These issues are discussed in greater length in the next three empirical sections. In order to illustrate the main argument the discussion in the empirical sections revolves around two topics. On the one hand I discuss the institutional changes that took place as a direct result of the introduction of the principles governing the operation of the structural funds.

Simultaneously I also discuss the institutional changes which took place at the domestic level after reforms that altered the territorial geography of the country and influenced the implementation patterns of the programmes funded through the EURP. Although the regulatory framework imposed by the principles is common to all the member states, the implementation patterns of the policy are very much affected by the domestic institutional arrangements. This is because: In each member state, national governments and sub-national actors have different degrees of participation in decision-making and power.

This reflects factors such as the distribution of competencies between national, regional and local level, political interests and linkages; the amount and scope of co-funding available, the number and scope of programmes to be dealt with at that level and administrative experience of managing economic development. It follows that practical 26 Sverdup, 2007 27 2005 European Policy Research Paper, No. 79 8 European Policies Research Centre How the EU affects domestic institutional capacities:

the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy arrangements for programming also vary, including the approaches to programme developments, project generation, appraisal, selection and monitoring and the extent to which these tasks are subsumed within the existing administrative structure or whether parts of the implementation are carried out by dedicated administrative structures and how these are organised. 28 3. REGIONAL DEVELOPMENT POLICIES AND INSTITUTIONS IN GREECE BEFORE AND AFTER THE IMPS The Greek state has been involved in managing socioeconomic activity throughout the post World War II period.

29 Since 1960 there have been at least six five-year development plans, 30 which aimed to provide a blueprint for the economic development priorities of the country. However, the focus was largely on national objectives, and any elements of a regional nature would end up becoming incorporated into the national developmental policy. 31 In addition, no institutional changes took place in relation to the authorities responsible for the management of the regional development resources.

32 For example, the nine development agencies established in 1977 were endowed with responsibility for administering the implementation of a system of incentives, but only for small scale projects. In addition, they were never consulted nor did they participate in decisions concerning developmental issues, even if these affected their areas. 33 Therefore, the formulation and administration of public investment programmes with a regional dimension remained under the control of the centre.

34 These programmes mainly consisted of individual projects of public works and politically they were pursued through the clientelistic interchange of local politicians with the central government. 35 In terms of the territorial distribution of competences, after the restoration of democracy in 1974 there were two levels of sub-national government: firstly, at the level of the prefecture, which was an extension of decision making of the central state; and secondly, at the first level of local self government.

36 The latter were very small communes and municipalities which enjoyed high levels of local political legitimisation 37 but were so fragmented that any coordination between them was very difficult. Overall, at the time: 28 OIR in association with LRDP and IDOM, 2003, p. 14. 29 Lolos, 1998; Pagoulatos, 2003. 30 1960-64, 1966-70, 1968-72, 1973-77, 1976-80, 1978-82. 31 Andrikopoulou and Kafkalas, 2004, p. 37. 32 ibid. 33 ibid, p. 38. 34 ibid. 35 Verney, 1994, p. 170. 36 Petrakos and Psycharis, 2006, p. 13. 37 Psycharis and Simatou, 2003, p. 660. European Policy Research Paper, No. 79 9.

European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy the pressing political priority was to restore constitutional legitimacy; no serious attempts were made to reform the spatial model of public administration. 38 On the whole, the Greek state has traditionally been centralised in the way that it has managed its territorial capacities; 39 indeed for some commentators it is the most centralised state in Europe, 40 and it has been so since its establishment in 1830.

41 As a result, Greece has traditionally had ‘a maximum national and a minimum sub-national apparatus. ’ 42 The election of the first PASOK government in 1981 was followed by the first substantive steps towards the decentralisation of the regional authorities. At the time the main authorities at the sub-national level were the 55 prefectures, with the prefect being appointed directly by the central government and in particular by the Ministry of the Interior.

Therefore, although in theory there was regional autonomy in the form of the prefectures, in practice it was constrained by the fact that the representatives were not democratically elected by the local population. At the same time there were around 6,000 Local Government Authorities (LGAs) labelled as municipalities and communes, of which 56% had fewer than 500 inhabitants and 83% had fewer than 1,000 inhabitants. 43 As far as the regional classification was concerned, there was no official regional territorial distribution.

To be sure, each central government Ministry would unofficially devise its services in regional terms. Nonetheless, there was no constitutional authorisation of this distribution and each Ministry would devise its own regional classifications. Furthermore, the classifications employed were mostly different with each other depending on the individual administrative needs of each government ministry. 44 PASOK embarked on a programme of extensive decentralisation, providing the sub-national authorities with significant responsibilities. In the years that followed, the powers of the LGAs were enhanced, though to a much lesser extent than expected.

45 More significant were the changes that took place at the level of the prefectures. Responsibilities for issues like town planning, health and education were transferred to those with a Law that specified these changes in 1982. 46 Overall, these changes in the territorial relations of the Greek state were entirely inspired by domestic considerations. 47 The participation in the EC 38 ibid. 39 Psycharis and Simatou, 2003, p. 647. 40 Featherstone and Yannopoulos, 1995, p. 252. 41 Ioakimides, 1996;

Chlepas, 1999; Andreou, 2006. 42 Papageorgiou and Verney, 1993, p. 140. 43 Georgiou, 1994a, p. 134. 44 Psycharis and Simatou, 2003, p. 653. 45 Andreou, 2006, p. 244. 46 Paraskevopoulos, 2001. 47 Ioakimides, 1996, p. 346; Andreou, 2006, p. 244. European Policy Research Paper, No. 79 10 European Policies Research Centre How the EU affects domestic institutional capacities: the Europeanisation of Greece’s administrative system in the context of the EU’s Regional Policy did not feature at all as a justification for these developments. If anything, as Andrikopoulou and Kafkalas 48 put it: the shift was based on the anti-European rhetoric, which emphasised national pride and national autonomy against the so-called European Economic Community (EEC) directorate.