Panorama of the Basque Country and Its Competence for Self-Government

EuropeanPlanning Studies, Vol. 8,No. 4, 2000

RESEARCHBRIEFING

Panorama of theBasque Country and its Competence for Self-Government

MIKEL GO´ MEZURANGAand GOIO ETXEBARRIA

ABSTRACT The aimof thisarticle is to present a panoramicview of theBasque Country ’scapacityand competencefor self-government. We haveanalysed the historical process of industrialization,the effects of the industrialcrisis and new possibilitiesfor development ofthearea ’sownregional policy based on new institutions (Government andProvincial Councils ) thatemerged fromadministrative decentralization in Spainafter 1980. Inthe following section, we analysethe scope of authorityin EUregions.Some of thecultural and transport infrastructureprojects backed by these Basque institutions are studied. These projectshave had a considerable impacton theBilbao Metropolitan Area. The changesobserved in thenation state, speci cally in Europe,show contradictoryeffects. However, they have reduced the State ’ssovereigntybut at the same timehave prompted the Stateto retainpowers rather than transfer them to lower institutional levels. This clashes with the desire of some regionsor historicalnations to access greater shares of self-government, suchas the case of theBasque Country.

1.Introduction Thehistorical BasqueCountry is currentlydivided between two States: France andSpain. Following theprocess of administrativede-centralisation carried out in Spainfrom 1980, the southern partof theBasque Country wasdivided into twoautonomous communities: Navarre andthe Basque Autonomous Community (BAC) which is madeup of thehistorical territories of Araba,Gipuzkoa andBizkaia. In parttwo of this article,we willbrie y analysethe process of industrializationthe Basque Country underwent,with severe de-Industrialization in theseventies andeighties as a counterpoint. Thenew political institutionalization in Spain, which wasa resultof thereforms carriedout from theprevious regime,took placein this economic framework.We will analyse this issuein partthree of this article.This process allowedthe BAC (andalso the Navarre HistoricalCommunity ) to assumesome competences which, togetherwith their singular scal system,would enable them to manageissues related to industrialpolicy, innovation, infrastructures,culture, etc. Partfour willdeal with these aspects. The lasttwo sections offer an analysisof theEuropean framework in which thedifferent economic, social andpolitical agentsmust act, with special emphasis on regionalgovernment activities.

MikelGo ´mezUranga and Goio Etxebarria, Department of Applied Economics I, Universityof the Basque Country, AvenidaLehendakari Aguirre 83, 48015 Bilbao, Spain.

0965-4313print/ 1469-5944online/ 00/040521 –15 Ó 2000Taylor & FrancisLtd 522 ResearchBrie ng

2.From IndustrializationtoDe-industrializ ationin theBasque Country The emergenceand uni cation of the‘ national’marketin thenineteenth centurybrought aboutthe loss of historical institutions in thedifferent Basqueterritories. These characteristic institutions, which werethe result of adifferentialhistorical process, conferred aconsiderable degreeof sovereignty in different eldssuch asthecapacity for taxcollection andnormative andlegislative authority on different socio-economic issues. Untilthe mid-nineteenth century, theBasque economy wasfundamentally based on agriculture.From themid-nineteenth century, theiron mines locatednear the Bilbao estuary wereoperated on alargescale by foreign andBasque rmsin orderto exportthese products to bigEuropean iron andsteel industries, most of which wereBritish. Prots from these mining operations wereinvested in other typesof production (manywere directed to theiron andsteel industry ),thusgiving riseto amarkedprocess of accumulationof capital.The BasqueCountry wasto bethesite for leadingiron andsteel rms,shipyards, shipping rms, iron processing, electrical,chemical andpaper industries. Furthermore, the Basque nancial sector becamethe most powerful in Spainwith investments in allareas of thecountry. Productive specialization of Basqueindustry took placein this mannerand was strengthened byintense accumulationof capitalduring the 1960s and rstyears of the1970s (Etxebarria, 1993). From themid-1970s jobs in industrywere lost on aconstant basis. This wasespecially noticeablein theproductive eldsin which Basqueindustry showed thehighest degreeof specialization (iron andsteel, ship building,machinery manufacture,etc. ) Unemployment affected even themost stable jobs andlarge rmshad to shutdown. During the1975 –1985 economic crisis in theBasque Country, change in employmentwas negative ( 2 2.1% annually).Bysectors, industrydropped to account for 46.3% of totalemployment as opposed to 54.6% (Navarro,1994 ). High concentration in theproductive eldswhich wereto suffer mostfrom thedrop in internationaldemand and competition from newindustrialized nations madethe industrial crisis especiallyacute. Certain inherent featuresof theprocess of accumulationin theBasque Country such asthe concentration of industryand population, extreme environmental and urbanisticdeterioration, poorly equippedproductive and social infrastructures,etc. further aggravatedthe situation. The causesmentioned abovemade Basque public authorities concentrate on attracting investmentsto compensatefor theloss of autonomous investors andthe Spanish publicsector untilwell into the1990s. Navarrewas an exception owing to largeforeign investmentin the automotiveindustry ’sbaseof operations, itsauxiliary sector (especiallyPamplona ) and the agriculturalindustry in theprovince (Franco &Etxebarria,1995 ).

3.New Institutional Systemin Spain: TheLegal Competence of Basque Institu- tions The currentinstitutional system of thepeninsular Basque Country was not setup until 1979 when adecision wasmade to form tworegions endowedwith a certaincapacity to implement regionalpolicy. Theregional institutional system did not implythe creation of aBasque politicaland economic space. In effect, theSpanish Constitution of 1978 andthe division of theautonomous communities separateNavarre (which is partlyBasque speaking ) from the other territories.This division wasto become moremarked with time. Despite historical, culturaland economic ties, institutionalrelationships betweenthe two communities have been tenseand scarce in recentyears. Thestructure of theAutonomous PublicFinance Systemin Spainis theresult of aprocess ResearchBrie ng 523 thatbegan in 1979 –1980 withthe approval of theStatute of Autonomy which setdown the powersto betransferred. This nancing arrangementis conducted bythe Basque Govern- mentand the Provincial Councils. Financing of Spanish autonomous communities is basedon adualsystem: The Common LegalSystem and the System of HistoricalPrivileges. Due to historical reasons, only theBAC andNavarre have this arrangement.This decentralization, which endows theBasque Country withdecision-making capacityto administera largepart of itsearnings from taxation andpublic expenses, has allowedfor moreef cient management. Furthermore,it has enabledimplementation of legalnorms in the eldsof economics and taxes.

3.1 The EconomicArrangement The autonomous communities to which theHistorical Privileges System is appliedhave a nancial agreementcalled the ‘ Economic Arrangement’for theBAC or the‘ Agreement’for Navarre.This nancing agreementendows theseprovinces witha certaindegree of autonomy concerning managementof income andexpenses to exercise theirauthority. The systemfunctions asfollows: The BasqueCountry has limitedpowers. The Basque Country mustcontribute to generalState expenses which correspond to powerswhich have not beenassumed. Thus, this is thecurrent concept of ‘quota’;thetransfer of revenueswhich correspond to non-assumedpowers from theBasque Country to theState. However, as the Statuteof Autonomy setsdown, levying, management,liquidation, collection andinspection of alltaxes except import –exportduties are to becarried out within each historical territory bytherespective Provincial Councils. Thus, each Provincial Council mustdeliver a partof the revenuescollected (allowance) to theBasque Government. This allowanceis determined according to different variables:Relative Cost of AssumedPowers, Provincial Revenueand thetax burden imposed by each Provincial Council.

3.2 Exerciseof Competence The scope of competence thatcan beassumedby theBAC andNavarre is greaterthan that of other Spanish autonomous communities. This is dueto both greatercommunitary awarenessand historical reasons. Togetherwith considerable claims, thesefactors have made itpossible for theareas to setup their own taxsystems which foster andallow for greater powers.From thebeginning of the1980s, theBAC beganto receive thetransfer of powers conferred in theStatute of Autonomy. In this manner, theBAC achieved ahigh levelof normativeand managerial autonomy in the eldsof education, culture,public order, trade, health,etc. The degreeof competence achieved in the eldsof industrial,regional and technological policy is alsorelevant.

3.3 Industrialand Technological Policy During the rstyears of autonomous management,the autonomous governmentchose to aid SMEswhich wereexperiencing greatdif culties and in dangerof shuttingdown owing to the prolongednegative impact of theindustrial crisis on theBasque economy. In spiteof its limitedlegal and nancial authority,the Basque Government grantedaid (assubsidies and loans) which wasmanaged by SPRI (Society of IndustrialPromotion andRestructuring ). SPRI,created in 1981, is subordinatedto theautonomous government. Similarto regional developmentagencies, agreatamount of theBAC ’sindustrialpolicy is channelledthrough it. 2 SPRI’smain objectives areto: (a) carryout actions focused on creatinga suitablebusiness climate; (b) encouragenew foreign rmsto setup in thearea; (c) seek andidentify new 524 ResearchBrie ng products,processes or technologies in theworld economy thatmay be applied in Basque rms.In orderto full theseobjectives, SPRIhas beenendowed with a seriesof programmes directedat creating incentives for industrywhile also supporting change andtechnological innovation. According to theStatute of Autonomy, theBasque Country has exclusive competence in the eldof “scientic andtechnical researchin co-ordination withthe State” . However,transfer of thesepowers has not beensettled. The nancing theBasque Country receives from theNational R&D Plan, theCentre for Technological andIndustrial Develop- ment (CDTI) or thePlan for Technological andIndustrial Action (PATI) is minimalin comparison to Basquefunds. Themost relevant steps in the eldof innovation have beencarried out from two administrativelevels: the Basque Government (throughSPRI ) andProvincial Councils. The rstattempts to dene atechnological policy on which industrialpolicy wasbased took place in 1990 withthe Plan for Technological Strategy.The Plan for IndustrialTechnology (1993–1996) (Gobierno Vasco, 1993 ) waslater approved within theframework of technologi- calpolicy andthe last was the Plan for Science andTechnology (1997–2000) (Gobierno Vasco, 1997).

· The Planfor Technological Strategy (PET-1990). The UET,3 which denes themain technological areasand projects to becarriedout, wascharged with the task of drawingup thePET. A shift wasmade from theprevious policy of spreadingor assimilatingexisting technologies to apolicy basedon planningand selecting the most technologically interesting areasfor theproductive environment andplacing priority on ageneration of new technology. · In 1993, theBasque Council on Technology (CVT) wascreated. It is currentlycalled the BasqueCouncil for Science andTechnology (CVCT) andproposes actions relatedto Innovation Systems.The ultimateresponsibility for managementof technological policy proposedin thePlan for IndustrialTechnology (PTI) lieswith the CVCT. The CVCT ’s aimsare focused on integrationof publicand private approaches in addition to organizing, coordinating andencouraging R&Din theBAC. The CVCTis to satisfy thetechnological needsof industrythrough technological policy andimprove entrepreneurialcompetitive- ness. · In 1997, theSteering Committee on Science andTechnology (CCT) wasset up as an interdepartmentalorgan to coordinate thede nition anddesign of scientic andtechnologi- calpolicies. However,the Basque Government ’srstgeneral plan, known asthe General Frameworkof Action in IndustrialPolicy (Gobierno Vasco, 1991 ),didnot go into effect untilthe nineties.

This industrialpolicy, begunin 1991 andcontinuing atpresent,is mostambitious and focuses on groupingtogether the different areasrelated to industrialpolicy: investment, training, technology, etc. However,some aspectshave beenoverlooked in this plan:infrastructures, territorialorganization, social policy andhousing policy, for example.Basic policies envisaged in this planinclude:

· CompetitivenessProgramme: Focused on promotion of clustersunderstood as groups of industriesand related entities that form asystemof verticalrelationships (buyers–sellers) andhorizontal relationships (customers,technology, etc. ) andoffer mutualsupport. Exam- plesinclude: machine-tool; whitegoods, supplysector for automotiveand aeronautics; addedvalue steel; agriculture-food. Emergent clusters include: energyand telecommunications. · Horizontal aidfor technology andinnovation: this is channelledthrough SPRI and a policy to protectand foster newtechnology centres. ResearchBrie ng 525

Table 1. BasqueGovernment nancial allocations

Department Year 2000 (%)

Health 31.3 Education 26.9 PublicDepartment 8.7 Interior 7.5 Justice, work andsocial security 4.5 Industry,trade and tourism 4.2 Transportand public works 3.9 Culture 2.9 Organization of territory,housing andthe 2.3 environment Agricultureand shing 2.1 Other 5.7 Total 100

Source: The BasqueGovernment.

· Promotion of newinvestments: theobjective is to attractforeign investmentin viewof the improbabilityof largenew autonomous investmentsand foreign investors’caution when investing in theBAC. In this sense, norms and nancial meanswill be adaptedto achieve this objective.

4.Infrastructures Projects: CompetenceCon icts and Financial Autonomy If weobserve theBAC ’sbudget,and exclude the aspects related to innovation andindustrial policy which wedealt with in theprevious section, managementcapacity or autonomy in economic termsis basicallyexplained by twoaspects. On theone hand, themanagement of eldssuch aseducation andhealth, and on theother hand, the nancing of infrastructures projects.

4.1 Management of Fields Managementof education andhealth absorbs a largepart of thebudget (nearly60% of the BasqueGovernment ’sbudgetfor theyear 2000, asshown byTable1 ).These eldsare, above all,human resources areasand the largest allotments are devoted to publicservants ’salaries. The possibility of having one’sown educationalsystem is of greatstrategic interest. Direct inuence can beexercised on theobjectives andcontents thesocial systemis tobeendowed with. In this sense, bilingualeducation playsa key roleas an elementto enrich andorganize Basquesociety. Itis importantto highlight thestructural de ciencies of theBasque University. In thepast, thesede ciencies have preventedthe university from exercising itsinterface rolein theBasque innovation andproduction systemand this willcontinue to occur in futureunless drastic measuresare taken. These insuf ciencies contributeto thesystemic weaknessof theBasque socio-economic system,as was stated in theEuropean Commission reporton Universities, 526 ResearchBrie ng

Technology Transferand Spin-off Activities. The paperwas based on analysisof several Europeanregions, including theBasque Country (EuropeanCommission, 1998 ).

4.2 InfrastructureProjects The second relevantaspect that justi es the development of self-governmentconcerns infrastructuresprojects. Nowadays,any frameworkexplaining infrastructuresprojects requires thatwe consider threerelated and connected planesas if theywere stories in thesame building.This involves considering theaspect of theinfrastructure that contributes to the developmentand creation of wealth (ef ciency),theperspective of contribution to sustainable developmentwhen focusing on social redistribution,quality of life andenvironmental parame- ters,and nally,the territorial cohesion perspectivewhich can beaided by these projects. Nevertheless,the rstof theperspectives, related to efciency, has playedthe greatest role and continues to do so in policy implementedby Basque institutions. Alargepart of theBasque Government ’sandthe Provincial Councils’budgetsis earmarkedfor thepromotion of infrastructureprojects to foster economic development.We can classify themas: (1) interurbanand interregional communications infrastructures, (2) intraurbanand local communications infrastructures; (3) culturalinfrastructures, mainly with urbanand metropolitan impact.

CommunicationsInfrastructures. Thesework to link theterritory while connecting aregion or metropolitanarea with other regions or metropolitanareas. In theBasque case, some of the mostrelevant transport networks are: the high speedtrain (known astheBasque ‘ Y’), the road andmotorway network, airports (mainlythe Bilbao airport ) andthe Bilbao superport.

The Bidfor the High Speed Train. Since 1986, theEuropean Commission has backedthe high speedtrain, designing aEuropeannetwork for this purpose.The different administrationsin Spainare trying to have theirprojects recognized within thesetrans-European networks. The BasqueGovernment has bigstakes in this meansof transport.In thepreview of the SectorialTerritorial Plan on therail network, atleast80% of theinvestments were earmarked for theHigh SpeedTrain (HST),to thedetriment of conventional railsystems and existing lines. This is going to meanusing large nancial resources, withouthaving reacheda social consensus on theeconomic, territorialand environmental imbalancesand impact that an infrastructureof this typecan cause (Go´mez, et al.,1998, p.256 ). In effect, theHST accentuatesterritorial imbalances in favour of largeurban concentrations andmetropolises. In theBasque case, this imbalancewould bene t thecapital cities ratherthan the districts in theinterior of thecountry. Theapproach consists of fostering a territorialconception basedon ahierarchically arrangedsystem of cities, organizing andusing theterritory to satisfy themetropolis ’sdemandsand interests. If any project is andwill be subjected to thepolitical ups and downs of theMadrid government, itis theBasque HST. At one time,certain Basque political sectors managedto have itincluded in theoverall State plans but they were not ableto convince later governmentsto assumethese commitments. In fact, thepresent government has other priorities such asthehigh speedconnection withFrance via Catalonia.Furthermore, foreign relationsare entirely in thehands of thecentral government which meansthere is no possibility of negotiatingthis issuewith the Paris government (Go´mez et al., 1999, pp. 347–348). This is statedin theyearly report published by ‘ BilbaoMetropoli-30’ , theassociation which is thedriving force behind the“ StrategicPlan for theRevitalisation of Metropolitan ResearchBrie ng 527

Bilbao”: “The delayexperienced bytheso-called Basque ‘ Y’railwayproject is only aggravat- ing theexclusion of MetropolitanBilbao communication arteriesand threatens to isolateit from themain Madrid –Parisartery” (BilbaoMetropoli-30, 1998 ).

The RoadNetwork and Territorial Cohesion. The roadnetwork operates to connect andlink internallyand externally. These functions can boost territorialcohesion, one of themost interestingobjectives for acountry or region, althoughthis maybecome acontroversial issue. For example,the largest road communications macroproject, theVitoria-Eibar motorway, maynot bethe most widely accepted by certain sectors which consider thatit is more importantto foster connections withthe Mediterranean axis, one of thepoles that attracts growthin theEuropean scope. Furthermore,the planned motorway would mean a barrierto internalcommunications andwould have considerableenvironmental impact.An alternative routewould also be set out and would work asan internationalconnection throughthe BasqueCountry without having to cross theDeba Valley. For allthese reasons, different opinion groupspropose improving theDeba Valley communications basedon thepresent route,and backing theBilbao –Durango–Beasain–Tolosa–Pamplonacorridor which is con- sideredthe backbone of thepeninsular Basque Country andhas greatintegrating potential. Moreover, theVitoria –Eibarhighway (or motorway,which has not yetbeen decided ) involves high nancing costs. The BasqueGovernment andthe Gipuzkoa Provincial Council have optedfor itsconstruction in spiteof thefact thatcertain issues such asBrussels ’initial refusalto nance, theMadrid government ’slackof commitmentto nance, or theProvincial Council of Araba’s (currentlycontrolled by the same party as the Spanish government ) hesitation concerning theconstruction (expressedthrough delays in approvalof theproject, changes in itsstatus as a motorway,opposition to nancing, etc. ) have not beenproperly resolved.

The Airports. The economies of agglomerationand urbanization playsuch an importantrole in this eldthat they make it impossible to buildand enlarge important airports in those areas which do not surpassa minimumsize. The different amountswhich areplanned to be investedin Basqueairports clearly show thetrends towards concentration in largemetropoli- tanareas. In spiteof thecentral government ’slatestcutbacks, there is aclearpreference for theBilbao airport over theother Basqueairports (Go´mez &Etxebarria,1993, p.311 ). The Bilbaoairport has conrmed its place among the group of leadingEuropean regional airports (thenumber of travellersin 1998 was2,240,000; passengergrowth stands at 42.6% ). Asstated by ‘ BilbaoMetropoli-30 ’,this is theideal moment to consider theneed to start offering intercontinental ights, thefeasibility of which is obvious from thegrowing number of NorthAmericans who areattracted to themetropolis by the Guggenheim Museum.

UrbanCommunications Infrastructures. Thesecan contributeto theinternal cohesion of the different populationcentres. In thecase of MetropolitanBilbao, theMetro is contributing (andthis effect willbe reinforced withline two, currentlyunder construction ) to accessibility andgreater cohesion betweenpopulation centres. This positive contribution to social cohesion does not meanthat other considerations relatedto theproject neednot bestudied (costs, more universalaccess, faresand work conditions ) (Go´mez et al.,1999, p.345 ). Thestreetcar (which willgo into operation next year ) can alsoplay a role, although somewhatsmaller, as a cohesive force. Nevertheless,it poses some uncertaintyabout whether or not thetraf c problemsin thecentre of Bilbaowill improve astheycould actually become worse. 528 ResearchBrie ng

CulturalInfrastructures .4 Cities aremaking the most of theirtraditional assets— art and culture—in orderto revitalizetheir centres. They areusing museums, theatres, operas and auditoriumsto promoteeconomic development.These new cultural infrastructures are conceived to relatewith other buildingsand spaces within thewidest possible framework of economic andurban regeneration. Therecent cultural evolution of MetropolitanBilbao is characterizedby intense investment,which has allowedit to successfully promoteitself to foreign countries asa city closely associatedto leisureand culture. The Guggenheim-BilbaoMuseum, the best example of MetropolitanBilbao ’sbacking of cultureas a tool of revitalization andsector of thefuture, has welcomedliterally ocks of visitors duringits rstyear open to thepublic. With 1,300,000 visitors during1998, it surpassedeven themost optimistic forecasts andhas spectacularlycontributed to theinternational projection of Bilbaoand the BAC asa whole. The main challengenow liesin assuringthat the most is madeof thenew cultural infrastructures,not forgettingthose which alreadyexisted. This exploitation mustpreserve the long-termcoherence of thedifferent initiatives directedat associating theimage of Metropoli- tanBilbao to cultureand art. Therecent inauguration of theEuskalduna Congress andPerforming ArtsCentre joins thatof theGuggenheim-Bilbao Museum, therefore bringing anewcentrality to theneigh- bourhood of Abandoibarra,an excellentexample of thetransformation beingexperienced by theBilbao metropolis. After an investmentof over 13,600 million pesetas (51 millions pounds, approx.),this emblematicbuilding is, apartfrom acongress centre, thenew headquarters of theABAO OperaSeason andthe Bilbao Symphony Orchestra. AlanHowarth, the British Ministerof Culturevisited Bilbao recently (September1999 ) wherehe expressedhis interestin theurban and cultural infrastructures and investments. He considers Bilbao’sexperience asa modelfor other cities andregions thathave sufferedthe effect of crises andthe decline of industrywhich is thecase of some areasin theUK.

Infrastructuresand the Competence Framework. The autonomous communities cannot develop theirown infrastructurepolicy owing to theirdependence on Europeanand State frameworks. Nowadays,any infrastructureof acertainsize dependsdirectly or indirectly on theState government, eitherthrough competences [motorways,airports, telecommunications, the Spanish railnetwork (Renfe), etc.] or through nancing. Thelargest capital investments over timeare subjected to thecontingencies anduncertainty that surround political negotiations andagreements with central governments. This is dueto thefact thatcentral governments will tryto bringin infrastructuresagreements in broaderpolitical negotiation packetsthat they will manageaccording to theiroverall interests. Any infrastructurecan bebargained for in any politicaltransaction, so itis impossibleto makereliable predictions beforehand (Go´mez et al., 1999, p. 344).The mostrecent example (atthe end of 1999 ) wasthe transfer of theA-8 motorway (which links Bilbaowith San Sebastia ´nandthe French border ) from Statehands to theBAC. The BasqueGovernment hadclaimed for thetransfer for manyyears. This transferwas carried out in exchange for thePNV ’s (BasqueNationalist Party, the majority in theBasque coalition government ) supportin theSpanish Parliamentfor theState budgets for theyear 2000, presentedand defended by the Spanish government. In any case, “itis essentialto co-ordinate thedifferent infrastructuresin theEuropean frameworksince internationalisation of capitaltends to go beyond thecontext of State-national networks. This means,for instance, thattransport of energy, motor waynetworks, railwaynetworks and the transfer of datawill be determinedat an internationallevel. For this reason, any demandfor self-governmentor sovereignty mustconsider thelimits imposed by ResearchBrie ng 529

Table 2. Powerindicators for Bilbaocompared to other Spanish cities

Leveland position Field Typeof indicators (comparedwiththe rest )

Qualityof humanresources — Demographic — Low —Ratesof academic — Very high qualication —Ratesof work and — Average unemployment —Poverty levels — Average Internationalization of the— Export –importrates — Very high metropolis — Air traf c — High — Tourists —Averageto low —Visitors to fairs — Very high The society of knowledge— Internetusers —Averageto high —Information Technology —Low (Market) —Publications — Average —R&DSpending — High —Technology parks — High —Attendanceto — Very high performances —Travelexpenditure — Very high —Readership — Very high Sustainabledevelopment — Gross AddedValue Tax — Averageto high per capita —Airquality — Low —Municipalcleaning — Very high expenditures —Housing conditions — High —Qualityof life — High —Household electric — Low consumption — Libraries —Averageto high —Assistanceto persons —High

Source: Ownstudy based on theabove mentioned ‘BilbaoMetropoli-30’ report (1999). co-ordination, and,in some cases, thatit may even beimpossible to developsome projects which have arisen from smallareas like theBasque region” (Go´mez et al.,1999, p.345 ).

Comparisonwith other Metropolitan Areas of Spain. In astudycarried out by the association “BilbaoMetropoli-30” (1999),theBilbao Metropolitan Area was compared with six other key areasof Spain: Madrid,Barcelona, Valencia,Seville, Zaragoza and Ma ´laga.A setof indicators wasselected in orderto obtain avision of each metropolitanarea ’sposition in certain elds (Table 2). Strategically,the Bilbao Metropolitan Area is in agood position in comparison to the other key metropolitanareas in Spain. Furthermore,it is importantto highlight therole that 530 ResearchBrie ng autonomous institutions, both theBasque Government andthe Provincial Council of Bizkaia, have playedin achieving theseresults. In part,this is dueto the nancial capacityof the Basqueautonomous systemwhich is basedon thearea ’sown scalsystem. Wealso observe good positions in strategicsectors which indicate futurepotential. The tendency to concentrate resources in thearea to thedetriment of greaterterritorial cohesion andrationalization of theBasque Country asa wholeis apoint thatcould be criticized.

The Searchfor an AlternativeProject by Donostia-San Sebastia ń. The centralityof Bilbao, achieved to acertainextent because the Basque administrations considered itvital, has awakened distrustand, at some moments, discontent in other partsof theBasque Country. Donostia-San Sebastiańin particularhas considered thatits traditional role of Basquecultural capital has beenquestioned. The competition arising from this issueis aconsequence of excessively localistpolicies ratherthan a focus from acountry perspective.Therefore, itis understandable thatperforming artsand exhibition centreswere built at the same time in Bilbao (Palacio Euskalduna) andin Donostia (Kursaal).Thesecentres have similarcultural purposes and therefore, competewith each other since theyare an hour apartby motorway. Since 1993, theinstitutional relationship between the Provincial Council of Gipuzkoa and whatwas to datecalled the BAB District (Bayonne–Angelu–Biarritz)5 has beenmuch closer. Theresult of this cooperation is theEurocity of Bayonne-San Sebastiań, 6 within the frameworkof theEuropean Transfrontier Cooperation Project, Interreg.The Eurocity’s objectives includeimproving transportinfrastructures, highlighting thepossibility of extending thelocal rail line now joining SanSebastia ńandHendaye to Bayonne. This extension would belike a lightmetro in amodernEuropean city andwould make up the backbone of the Eurocity. Another eldof action theEurocity will work on is organization of territoryand housing. This experience, which is now consolidating, attemptsto nda placefor smalland mediumsized cities throughcooperation, asopposed to metropolisessuch asBilbao. Observ- ing thetendencies to concentrate economic activity andthe attraction of metropolitanareas, theinstitutions backing theEurocity project aretrying to playa roleand somehow compete withother cities to avoid beingalienated and falling into urbandecline.

5.Scope of Competencein theEU Regions Situationsvary greatly concerning thescope of thecompetence in theEU regions andmost developednations. However,it is possibleto identify agroupof regions or nations withouta Statethat show similarceilings in thescope of competence. This is thecase of Flanders, Scotland,Catalonia, the Basque Country andsome German la¨nder in theEU, in addition to Quebecin Canada.The levelof competence this groupof nations can reach is markedby a similarceiling in thelevel of competence envisaged.Nevertheless, as we have seen, theBasque Country basicallystands out due toits scalpeculiarities; its nancial agreementwith the State which makesit a uniquecase. The process which is now being nalizedwith the single currency, theeuro, has ledto the liberalizationof strategicsectors, to Europeanoligopolistic concentrations asopposed to ‘national monopolies’andto theimposition of monetarydecisions madeby central European authoritiesas opposed to “national macro-economic (monetaryand exchange rates ) policy”. In other words,the limits of ‘national states’have beengreatly modi ed. States have been reducedto meremanagers in increasingly ‘macro’eldsand absolute sovereignty is limitedto those eldsof social, labour,internal order, culture, daily life, etc. wherethe State has greater legitimacythan in thesupra state realm. Furthermore, in aframeworkwhere economic ResearchBrie ng 531 efciency is thepriority objective, developingsocial policy on aEUlevelis assigneda secondary role. In theEU theStates maintain absolute sovereignty or sharedpowers mainly in the elds of: · redistributiontasks in theirterritorial area, ranging from thetax system to social security, · norms andrights of theworkforce, · internationalrepresentation of allthe territories within theboundaries of theirsovereignty, · basic norms for organization of theeconomy andsociety, · construction andoperation of generalinfrastructures, · tasksrelated to maintenance of internalorder and the nation ’s status quo on theinternational scene · organization of publicspaces in the eldsof culture,communication, education, etc., · industrialand technological policy in theprimary sector andfor certainservices. The nations or regions werefer to as‘ toplevel ’couldsubsidiarily share or administratively managesome of thesepowers which areexclusively heldby theState. In this context, in depth analysisof thetransfer of powersstill pending from thecentral government to theBAC is calledfor. Itis quiteclear that the most important of thesepowers correspond to the eldsof work andsocial security, which arealso the most dif cult to transfer.Firstly, this is owing to thefact thatthese are areas that involve thegreatest amounts of revenueand are the speci c areasthat characterize theWelfare State (unemploymentand social security ).Secondly, these areascontribute to fostering national identityand unity thatlink thecitizen not only to rights concerning ofcial procedures but also to considerablematerial bene ts and include all the nation’ssociety asa whole. Thus, competence in these eldsis amechanism which is not limitedto redistributionbut fosters integration (Keating,1996 ).Powersin thesocial eldare asymboland instrument of solidarityand national cohesion. Perhapsfor this reason itis easier to understandthat the transfer of social securitycompetence from theSpanish Stateto the BACis ahighly sensitive issuewhich makesthe process difcult.

6.Changes intheNation State and Improvements in Self-Government Spain’sintegrationin theEuropean Community and speci cally the Maastricht Treaty now in force arebringing about a major change in theState ’ssovereignty. The Spanish Consti- tutionis losing arelevantshare of sovereignty. In this stageof internationalization of capital,Spain is readjustingits degree of sovereignty. ‘The bordersof competence’arenot xedbut now move to therhythm of thecommitments involved in belonging to theEU. Theprocess of monetaryunity is not exactlythe most favourablescene for developingor maintaining aframeworkof competence like thatof the BACandNavarre (Go´mez, 1998 ).In effect, taxharmonization in theEU, which is congruent withthe free movementof capital,will affect Basquecompetence in the eldof public nance. Consolidation of self-governmentprocesses requiresthe existence of thearea ’sown public sector, which is opposed to theEU tendency to improve private nancial termsas opposed to public.Furthermore, the process of unitymentioned aboveleaves less room for manouevre asinstruments which couldfavour joint anti-cyclical policies to ghtagainst joblessness disappear. Lastly,the European design, which grantsthe State exclusive representationin the Europeangovernment (theCouncil of Europe ),placesthe interests of thedifferent community regions in adisadvantageousposition astheregions cannot directlydefend their own sectors. For example,the Cantabric Rim is alienatedby Spain when improvementsin communications infrastructuresare designed or when livestock or shing quotasare negotiated. This is 532 ResearchBrie ng dueto thefact thatSpanish authoritiesact with a Stateperspective, frequently placing greater importanceon centralistpolitical and economic interests. Administrative,legislative or governmentalorganizations shouldbe the most appropriate to theinstitutional culture 7 thatexists in acertaincountry. Aculturedeposited in asociety’s history can, throughouttime, accrue ‘ social capital’. 8 Cultureis locatedin acertainterritory. Culture may exercise acertaindegree of inuence on theeconomic andoverall results that can beachieved in acertainspace (innovation, growth,ef ciency, etc. ).Itcan bedemonstrated that a relationship exists betweena given institutional/culturalenvironment anda certaintype of economic development. The BasqueCountry is characterizedby a higher unemploymentrate, activity more focused on industry,a largernumber of small rms,a higher populationof retiredindividuals, etc. Furthermore,the need to promotethe area ’sown languageand the Basque society ’sgreat capacityto join togetherand cooperate requireorganizations thatcan betteradapt to these featureswithin aframeworkof singularpolicies which areappropriate to specic cultural models.From aprogressiveperspective, this wouldmean having organizations andparliamen- taryassemblies more closely linkedto society, moreinfused withdemocratic values of transparency,showing greatersolidarity with the unemployed. Apublicsector moreappropriate to itscharacteristics is neededif amoreef cient economy is to beachieved. This culture/organizations adjustmentpointed out above may have thefollowing consequences: · Aclimatemore conductive to thedevelopment of certainbusiness sectors since agreater degreeof sovereignty couldstrengthen certain values that would improve thebusiness environment (trust,cooperation, etc. ). · Improvementin theenvironment where rmspartially acquire factors such asbetter access to information ows, greatercapacity to inuence strategicdecisions, improvementof physical infrastructures,a widerange of choices in the eldof training, betterknowledge andlower processing costs when obtaining aidor subsidiesor joining businessimprovement programmes. Johnson (1992) maintainedthat the institutional system could contribute to thegeneration and improveddiffusion of information, thusreducing the uncertainty derived from common economic andsocial relationships andimproving cooperation. Trust,cooperation, coordination, learningand social valuationof economic activities are theproperties that characterize therelationships establishedbetween the different participants in thesystem. Improved functioning of theeconomic systemis linkedto theintensity of these valueswhich expressthe capacity of systemic relationships. Amorecohesive spaceis expectedto bemore favourable to carrying outbetter institutionalmanagement. These more cohesive spaceswill be easierto ndin environments infused withprinciples of collective action andbased on ‘identity’.Alegaland political frameworkfor labourrelations is determinedby idiosyncrasy anda previouslyexisting singular cultureof relationships. However,the framework itself causes values linked to aspecic cultureof relationships to bebelieved, developed, fostered and maintained. How can inter-entrepreneurialcooperation arisein aworldwhere market logic dominatesand competition is theultimate value? A politicalinstitutional system which is relativelyclose to society, which generatestrust and strengthens certain cooperation valuesbased on aspecic typeof leadershipis needed,and must be based on common projects andinstitutions. Thepersistence of distinctive valuesmay mean inhibiting possiblechange. Asociety which is wary,less willing to reach agreements,where rivalry rather than cooperation is thenorm, willnot beable to setup institutional changes neededto achieve betterresults. The valuesthat prevail at a given momentin asociety condition theeconomic results ResearchBrie ng 533 which can beachieved. However,a country mayalso need a certainlevel of self-government to achieve specic results.There may be some objectives for improvementand progress that requireaccess to agreaternumber of administrativepolitical powers and would mainly requirecertain changes in values.In general,many of theresults would require collaboration of both factors; in other words,changes in valuesand a higher degreeof self-government. We can applythis thesis, for instance, to thepriorities andactions to beundertaken in aregion like theBasque Country to achieve qualitativeimprovements in innovation. 9 However,transfer of this normative-legalcapacity is requiredto passand change labour andsocial lawsand values (Medina, 1997; Monereo, 1996 )10 in orderto access certain socio-economic objectives from theBAC (for example,drastic reduction of unemployment,a shorterworking week,permanent jobs ) proposedby some social sectors. Thebases through which theEU convergence process is beingdesigned involve giving priority to certainobjectives thatkeep jobless ratesat approximately the same levels as the present,as re ected in theAmsterdam Treaty (1998, p. 276). In some of thenations withouta Stateobserved (Scotland,Quebec, the Basque Country ), thesocial sectors andsometimes political sectors mostinclined to thedemands of self-govern- mentare those mostinterested in improving overallwell being and labour relations in particular.For this reason, theypursue control of labourand social laws.

7.Conclusion The BAChas reacheda levelof competence similarto thatof regions withgreater capacity for self-government. Whatmakes the Basque case uniqueis itsalmost absolute sovereignty in the scal eldand the area ’scapacityto prepareits own technological andindustrial plans. Developmentof thearea ’scompetences andthe availability of nancial capacityfrom Basqueinstitutions throughspeci c policy thathas given priority to settingup anddeveloping privateactivities in certainspaces have ledto theirconcentration in urbanareas. This has particularlyenabled the Bilbao Metropolitan Area to transformfrom itstraditional economic base,in decline untila short timeago, andnow aimto become amoderncentre of growth basedon services, nance andculture, with good quick connection networkswith other surroundingareas of growthand Europe. These changes aretaking place at a momentin which theEuropean scene recognizes arecomposition of theStates ’scope of competence, togetherwith greater claims for autonomy andsovereignty from historical regions andnations. Thelatter often have greatersocial cohesion, basedon ahistorical cultureof relationships. In future,reinforcement of thevalues held by society (trust,cooperation, etc. ) jointly with progressin the eldof institutions for self-governmentcould propitiate better socio-economic results (innovative efciency, diversication of theeconomy andcreation of jobs ). This could bethe case of theBasque Country andother Europeannations andregions.

Notes 1. Concierto Econo´mico, Ley12/ 1981: Norma Ba´sica. BOE No. 127, 28 May1981. 2. SPRI (various years ) Informe anual . 3. Unit of TechnologicalStrategy (UET):Createdin 1989 within SPRI, theunit draws upproposals for technological strategyand selects projects. 4. Theinformation usedto drawup this section was obtainedfrom the‘ Bilbao Metropli-30’webpage. 5. TheBAB District, which joined Bayonne, Angeluand Biarritz for 27 years, becamean Organization of Agglomerations atthe end of 1999, thus aiming to broadenits competencesand sources of nancing. 534 ResearchBrie ng

6. TheBayonne-San Sebastia´nEurocity has apopulationof 613,000. 430,000 peoplelive in Gipuzkoa and183,000 in Lapurdi (TheFrench-Basque Coast ). 7. In this paper,culture is understood asa ‘signicant system ’in themeaning set forth byWilliams (1982),in other words, asa system intrinsic to allpolitical, economic andsocial systems without renouncing comprehension ofthe cultural system itselfas anobject of study.The de nition of the concept ofculture offered by Pare ´sandTremblay (1990) and Keating (1996) corresponds to what other authors callinstitutions. Keatingunderstands cultureas “ thecustoms, habits, traditions, beliefs, ways of life,ways of thought andbehaviour thatexist in acommunity andsubjectively the sense of belongingto asociety thatshares thesame history” (1996). 8. Putnam (1993, p. 67) links this concept to social organization understood asa setof norms and organizational networks unitedby trust which makeit possible to improve social efciency by facilitatingbetter coordination of thedifferent relationships andactions undertakenin its innermost realms. 9. Theresult would bethatin some cases achangein values (such ascooperation ) wouldbe needed to improve ‘Basqueregional innovation ’conditions while in others greaterinstitutional capacityfor self-governmentor acombination ofboth wouldbe needed (Cooke et al.,1997; Cooke &Go´mez, 1998; Comisio´nEuropea,1995 ). 10. Codifying legislationof the Workers Statute,Article 3 of theorder in Council 1/1995.314,5.

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