Regional Decentralization in Spain: a Way to Increase Dynamics of Economic Growth

Paper will present the impact of Spanish devolution process on the regional economic situation. Decentralization of power from central to regional and local government since the ratification of the Constitution in 1978, is one of the most important factors of Spanish success. The shape of Spain is determined by actions heading towards prevention of the country’s disintegration into different political structures. This course of action was successful and it allowed Spain to connect democratic developments with devolution of responsibilities and fiscal measures. Because of historical factors, an asymmetry in power decentralization can be observed. Some regions, specifically those with more practice in self-governing, obtained immediately a high level of responsibilities, while others, gradually increased them for the last twenty years. However all Autonomous Communities have nowadays much the same competencies. Another situation can be observed in fiscal autonomy field. The Basque Country and Navarre function under special agreements with the central government, which grants them a nearly exclusive fiscal autonomy. The remaining fifteen regions have been dependent on central government grants and ceded taxes for years, with a low level of fiscal autonomy. As a result, economic indicators in the Basque Country and Navarre reached much higher levels than in other parts of Spain. Also the situation in the labor market is much better in the two regions. Anyway the decentralization process speeded up the acquisition of governing skills and helped to improve methods of spending European structural funds. This is so important because European means obtained by Spain within the framework of structural funds and Cohesion Fund have played the role of the most significant instrument to determine economic development of Spain and particular regions. The European aid resulted in raised economic development rate, increased investment in infrastructure and caused considerable unemployment reduction