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Regional economic resilience and the role of traditional structures: the case of West Macedonia, Greece

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The economic crisis of 2008/2009 had an unprecedented impact to the Greek economy leading to profound transformations both at the political and economic level. Although it received worldwide attention, the Greek crisis was mainly discussed at the national level and its true geographic heterogeneity within the country has not yet been unveiled (Psycharis et al., 2014). Discourse on the field attributes this long lasting crisis primarily to the structural weaknesses of the Greek economy and the operation of the political and governance system (Petrakos, 2014; Featherstone, 2011). However, understanding resilience at the regional level has to take into consideration the specific territorial characteristics and idiosyncratic features of each region that go beyond the peculiarities of the Greek financial and political system (Petrakos and Psycharis, 2015). The developing literature on regional economic resilience focuses on different attributes of the regional ecosystem: the structure of the economy, the social capital, the system’s governance. Both empirical and theoretical investigations find it difficult to conclude to a wide number of concrete and broadly appropriate factors of resilience as the pattern of their interdependencies are contingent to the place itself and, therefore, they foment unpredictable dynamics (Bristow et al., 2013). Nonetheless, a high share of studies on resilience have confirmed the significance of variety, as an expression of diversity and redundancy of the systems’ elements (number and type of institutions, sectors, firms) as well as the existence of natural resource endowments, access to new knowledge (both endogenous to the region but also national or international) etc. (Davies et al., 2010; Bristow, 2010; 2013; Sagan and Masik, 2014). In any case, resilience must be situated within the context of longer run processes of change, policy options and human behaviours who sculpture the characteristics of an area, create path dependent effects and alter its development trajectory (Bristow, 2010; McKinnon and Derickson, 2013; Bristow and Healy,2014). This suggests that the study of resilience should be based on a deeper understanding of the historical path of an area and of the processes (economic, political, social) that formulated its current dynamics and interdependencies. This chapter focuses on the region of West Macedonia which, among the Greek regions, is one of the most severely hit. Based on a combination of information coming from a number of interviews with regional stakeholders and of empirical analysis, it aims to highlight key attributes and events, which while in the past provided strength and opportunities to the regional economy, they have now become obstacles against its efforts to move out of the crisis. More specifically, over a development trajectory that lasted more than fifty years, the Region of West Macedonia was transformed from a relatively isolated rural society into an area that was highly specialized in lignite mining and energy production. The region underwent a number of crises which nonetheless managed to overcome, based upon extensive public support (in the form of hiring to the wider public sector, loans and subsidies), triggered by significant political influence on the central government. Hitherto, these processes led to a structurally vulnerable productive system, sensitive to economic change.
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Regional economic resilience: the role of national and regional policies
1
Kakderi Christina*, Aristotle University of Thessaloniki, 54124, Greece
Tasopoulou Anastasia, Aristotle University of Thessaloniki, 54124, Greece
Word count: 8533
Abstract
In recent years, economic resilience has become a popular term both in theory and policy
practice. This interest was triggered by the fact that some regional economies were extremely
vulnerable while others have managed to overcome, more or less effectively, the worse
consequences of the current economic crisis. Within this context, questions arise regarding
the role that policies at both the national and sub-national levels can play in shaping regional
economic resilience. Although high in the academic and political agenda, understanding the
policy and governance aspects of resilience still remains a relatively underdeveloped area. The
paper contributes to this debate focusing on an area which has been most severely hit by the
crisis, the region of West Macedonia, in Greece. The case study builds on the historical
trajectory of the region in order to explain how different types of policies have influenced the
ability of West Macedonia to respond to economic slumps and crises of the last thirty years.
Evidence suggests that national protectionist policies largely explain resilience of the region
against previous crises but also its vulnerability towards the still ongoing economic crisis.
Keywords: regional economic resilience, evolutionary economic geography, economic
crisis, policies for resilience, West Macedonia
*Correspondence to: Christina Kakderi, URENIO Research, Aristotle University of Thessaloniki,
54124 Thessaloniki, Greece; Email: christina@urenio.org
1
The paper draws on a recently completed case study which was part of the ESPON research project ECR2 -
Economic Crisis: Resilience of Regions, TPG Lead partner: Cardiff University. It is based on the work of the AUTH
team under the scientific coordination of Prof. G. Kafkalas and Prof. E. Andrikopoulou. However, the authors take
full responsibility for the opinions expressed in this paper.
Introduction
During the last decade economic resilience has become an extremely popular term both in
theory and policy practice. Besides the developing literature regarding the meaning of the
notion (Folke, 2006; Christopherson et al., 2010; Pendall et al., 2010), there is also a rising
debate on the policy level about the most appropriate measures and strategies which reduce
the vulnerability of spatial systems to shocks and enhance their ability to better respond to-
and recover from the crises (Wink, 2014; Bristow and Healy, 2014; Crespo et al., 2014). Given
that shocks and disturbances are rarely spatially equitable (Martin and Sunley, 2014) the
discourse is mostly being built on regional, local and urban economies rather than the national
ones. Despite this trend, discussion on the policy level has vaguely followed a swift of interest
from the national to sub-national context.
At the European level, this topic is particularly relevant in the case of Greece. Over the last
few years, the country has been under scrutiny due to the debt crisis and its unfolding
multiplying effects within the Greek territory. A lot of attention was given to the austerity
measures intended to diminish the public debt as well as the efforts towards the structural
reform of the Greek economy. These actions will undoubtedly improve the general conditions
for recovery and growth. But while focusing on lower spatial levels, will they make Greek
regions more resilient, particularly considering their different context and the differences
observed in the severity of the experienced impacts of the crisis (Psycharis, 2012)?
Not only in Greece, but in all regions that have experienced some kind of economic downturn,
policy makers question themselves: What type of policies can make countries, regions and
even urban areas more resilient? As crises are contextual, meaning that their type,
development, duration and severity may vary, where should one put his efforts on? Is it
possible to develop some tools to prevent or, at least, mild the strongest consequences of
crises, and at which level of policy making?
The paper aims to shed light on these questions by exploring the impact of different policy
measures on the resilience of a peripheral region in Greece, the region of West Macedonia.
West Macedonia has been most severely hit by the recent economic crisis presenting loss of
GDP growth and exceptionally high levels of unemployment
2
. In 2012, for example, the region
presented the fifth highest unemployment level, the highest young unemployment level
(72.5%) and the second highest female unemployment level (36%) among the 270 NUTS2
regions of the EU27; and still, until today it is listed among the regions with the highest
unemployment. Based on the opinions collected from 35 interviews with key regional and
local stakeholders we adopt an evolutionary perspective in order to analyze how policy
choices of the last thirty years at different policy making levels have influenced the region’s
ability to respond to the current crisis. During this period, West Macedonia went through a
number of crises that affected its development profile and led to different recovery paths and
experiences. It is argued that for many years national protectionist policies were the major
force for bringing back the region close to its previous state of equilibrium after natural or
economic shocks and disturbances. But it was the same policies that gradually contributed to
2
http://europa.eu/rapid/press-release_STAT-13-78_en.htm
the region’s vulnerability by bringing rigidness to the local system and making it unable to
respond to the challenges of the current crisis.
The remainder of the paper is divided in four sections. The next section reviews briefly the
literature on the theory and policy discourse on resilience in order to develop an integrated
understanding of the concept. This is followed by a description of the Region of West
Macedonia and its historical trajectory providing the background for understanding the
context of the current crisis and of the previous ones through a historical perspective. In the
last section of the paper, conclusions from the findings of the case study are discussed
providing some general recommendations for policy makers.
Regional economic resilience and the role of policies
A theoretical framework for regional resilience
Resilience is a concept that has been used in the literature as early as the 60s; yet, its
theoretical construction is still evolving (Folke, 2006; Martin and Sunley, 2013). This malleable
term, which can be applied in many contexts and capture different meanings (Christopherson
et al., 2010), is linked to the study of complex systems’ dynamics
3
(Holling, 2001). Although its
origins lie in the environmental and physical sciences, the term has been used and adopted
by social sciences, such as the urban and regional studies, and economics (Dawley et al., 2010;
Martin and Sunley, 2014). In fact, today we see a widespread application of the notion of
resilience in the study of the dynamics of spatial economic systems, arguing on how they
respond to economic shocks and disturbances (Bristow et al., 2013).
The concept of resilience aims to describe the stability of a system against interference
(McKinnon and Derickson, 2013): this may be a natural disaster, a catastrophe caused by
climate change, war or a terrorist action (Coaffee, 2009; Stevens, et al. 2010; Hutter et al.
2011), a social conflict or an economic shock (Galaz, 2005; Simmie and Martin, 2010). Such a
multidimensional concept examined through the perspective of complex adaptive systems
cannot only be defined as the ability for resistance or recovery by returning to a previous state
of equilibrium (“engineering resilience). It also embraces the notion of re-orientation and
renewal (Martin, 2012), which means the ability of a system to adapt, reorganize itself and
change its path of growth. Resilience as a concept that reflects the ability for transformation
is very close to Shumpeter’s notion of creative destruction; a process of self-organisation and
restructuring through novelty and innovation (Simmie and Martin, 2010; Bristow et al., 2013).
Following the above, resilience seems to be a desirable attribute for any spatial system. But
what is that causes resilience? Evidence on factors of resilience may be found in different
aspects of the system such as the structure of the economy, the social capital, the system’s
governance. Both empirical and theoretical investigations find it difficult to conclude to a wide
number of concrete and broadly applicable/appropriate factors of resilience as the pattern of
3
Complex systems are self organizing systems, comprised by heterogeneous and multiple inter-
connected elements which are characterized by adaptation, learning and transformation (Ladyman et
al., 2013). They can refer to a natural ecosystem, a national/regional economy or a people’s community.
their interdependencies are contingent to the place itself and, therefore, they foment
unpredictable dynamics (Bristow et al., 2013). Still, a high share of studies on resilience have
confirmed the significance of variety, as an expression of diversity and redundancy of the
systems’ elements (number and type of institutions, sectors, firms); the existence of natural
resource endowments; access to new knowledge (both endogenous to the region but also
national or international) etc (Davies et al., 2010; Bristow, 2010; Kirchner et al., 2014; Sagan
and Masik, 2014). Furthermore, a lot of discussion focuses on the inherent capacities of the
system for adaptation and self-organization, such as openness; social learning and social
memory; modularity and connectivity; institutional and organizational inertia and change;
systems of adaptive governance etc (Folke, 2006; Simmie and Martin, 2010). Finally, networks
and mechanisms for participation and learning can act pro-actively establishing alternative
potential options (Lebel et al., 2006), while business networks, innovation system and
entrepreneurialism are critical in sustaining competitiveness by producing innovations and/or
opening up to new markets (Evans and Karecha, 2013).
Regional economic resilience as a scientific discourse is still at a relatively early stage;
however, it illustrates a diachronic problem: why some regions have managed to overcome
the consequences of these disturbances more quickly and more effectively than others.
Christopherson et al. (2010) mention two reasons which justify why this term has become so
popular at this historical moment. First is the widespread sense of risk and uncertainty that
people and economies face today, and second, the interconnection of places and economies
due to globalization which has increased the perception of vulnerability to external conditions.
Another reason for its popularity may be that it fits well with evolutionary theory, by stressing,
on the one hand, the dynamic and evolutionary processes for self-transformation and renewal
and, on the other, by giving emphasis on the regional history and factors which shape the
region’s developmental trajectory.
To explain this further, crises are a recurring phenomenon in the economies worldwide;
however their context varies from sectoral crises to shocks caused by external economies. In
addition to that, there are also differences in the scale and duration of these crises. Regions
may experience different crises in a different way and the type and level of resilience of a
region may vary between different shocks in time (Martin, 2012; Wilson, 2012). Therefore,
resilience must be situated within the context of longer run processes of change and policy
options, who sculpture the characteristics of an area, create path dependent effects and alter
its development trajectory (Bristow, 2010; McKinnon and Derickson, 2013). This suggests that
the study of resilience should be based on a deeper understanding of the historical path of an
area and of the processes (economic, political, social) that formulated its current dynamics
and interdependencies.
The conceptual debate regarding the notion of resilience and the difficulties in revealing the
factors that underlie this concept, create difficulties in finding the right indicators for its
measurement. Challenges are also associated to the scope and time of resilience (resilience
of what and to when?). Two measures have been proved more accurate by most studies;
these are GDP and employment (or unemployment). The two indicators measure whether a
region has managed to resist to a crisis or it has regained pre-crisis levels of economic activity
and employment (Hill et al., 2011; Bristow et al., 2014). Although we recognize that these two
measures leave outside significant aspects of the concept, for simplicity reasons we will also
use them for indentifying the level of resilience in our Case Study area.
Policy issues for regional economic resilience
Parallel to the discussion outlined in the previous section about the meaning and the
components of resilience there is a growing interest on policies fostering regional resilience
(Wink, 2014). The role of policies can be placed on the basis of precautionary planning in order
to shield the region against (externally or internally induced) shocks; tools and actions for
stabilizing the region and mitigating the worst impacts of the crisis; and processes for
transformation, re-orientation and renewal that help the region recover from a crisis. Despite
the growing interest, literature on this topic is still rather limited (Dawley et al., 2010; Bristow
et al, 2013; Hill et al., 2011).
While the two may have many resemblances, policies for resilience in the form of preventive
interventions are far more desirable than treatment strategies aiming at the repair of existing
disorders (Luthar and Cicchetti, 2000). Existing literature stresses the need to reduce the risk
by addressing the system’s structural factors of vulnerability, such as dependence on a single
sector, technology or market; centralized political control; lack of collaboration and
networking etc (Bristow et al., 2013; Berkes, 2007). In addition to that, it puts emphasis on
protective factors which enhance the adaptive capacities of the system’s agents and
structures, such as creating endogenous sources of new knowledge and connecting those to
external ones; securing related variety; facilitating networking and learning and establishing a
climate for creativity and innovation (Winges, 2009; Ficenec, 2010). As the understanding of
resilience is based on the systems concept, policies should also try to decrease
interdependencies (Bristow et al., 2013).
In particular, fostering diversity (in terms of sectoral specialization, size of enterprises,
economic actors, knowledge bases and opportunities) helps to reduce the risk but also
provides the seeds for re-orientation or renewal in the sense that it establishes opportunities
for alternative development pathways. Diversity is also important in terms of including new
constituencies in the structures for policy making, as the bringing of different views and
considerations expands the number of available solutions (Berkes, 2007).
On the other hand, shock-counteracting or adaptive resilience is linked to the ability of the
system’s agents for ingenuity and flexibility; to social and institutional learning and
connectivity (Folke et al., 2005). Besides, a society’s ability to foster resilience resides in its
actors, in the social networks and institutions (Lebel et al., 2006). This is not only dependent
on the inherent capacities of the system’s elements but on their level of openness,
communication and networking. It also requires building a social and institutional memory of
past events (Adger et al., 2006), as the effect of social memory on collaboration and dialogue
rests in that it helps to “reorganize conceptual models and paradigms based on a revised
understanding of the conditions generating the crisis (Berkes, 2007, 287). McKinnon and
Derickson (2013) also emphasize the importance of fostering cultural recognition in
promoting a sense of confidence, self-worth and self- and community- affirmation which fuels
mobilization and activism. These elements not only bring opportunities for system renewal
but also enhance the emergence of dissipative structures.
Other contributions focus on the level and role of governance (Berkes, 2007; Bristow and
Healy, 2014). Governance refers to the structures and processes by which societies share
power (Lebel et al., 2006) but also to the framework conditions for policy design and strategy
implementation. According to Lebel et al. (2006) there are three dimensions here: polycentric
and multi layered institutions; public participation and deliberation; and accountability. As
local communities and institutions are embedded in the system itself and their interactions
constitute its backbone, governance has become the key connector for allowing the system’s
elements to respond and self-organize. Therefore, engaging local communities and
institutions in the management of resilience by sharing management power and responsibility
is of primary importance (Berkes, 2007; Gailard, 2010).
Yet, the abilities of communities and of governance bodies at lower levels of policy making
may sometime be inefficient and institutional linkages/connections with national or
international level may be imperative. This proposition should not be interpreted as inability
of the regional and local structures in managing resilience, but as a need for establishing
complementarities with different levels of policy making. Besides, centralization of decision-
making is often responsible for the lack of self-organization capacity, as it deprives from
various levels of political organization to learn from their own mistakes (Berkes, 2007).
Literature refers also to a number of principles on how policies for regional resilience should
be designed: they have to be flexible (CLES, 2010); with decreased interdependencies in the
sense that the success of one measure is not linked to the success of other measures (Bristow
et al., 2013); they have to be place-based, sensitive to the geographic, social, economic and
political context (Gailard, 2010); but, at the same time, open and outward-looking (McKinnon
and Derickson, 2013); they should also be placed on the basis of an on-going process, setting
long-term objectives for the area (Dawley et al., 2010). With regards to governance, policies
should be the output of horizontal collaboration between communities, institutions and
authorities at the regional and local level, and of vertical complementarities with the national
state policies and through connections with international knowledge experts (Bristow, 2010).
Lastly, they should be the result of flexible structures of governance (CLES, 2010).
Concluding, it seems that although quite similar -especially when it comes to long term
strategies and objectives-, policies for resilience are not identical to regional development
policies (Bristow, 2010; Dawley et al., 2010). To these, the notion of resilience can add a novel
and added value thinking which means more than simply the repackaging of existing
strategies, approaches and measures in a new language (Dawley et al., 2010, 9).
The Region of West Macedonia and its historical trajectory through the
different crises
Review of the region and current status
The Region of West Macedonia is one of the 13 self-administered regions of the country and
consists of four Regional Units: Florina, Grevena, Kastoria and Kozani (capital). It is a peripheral
region, mountainous and landlocked, located in the north-west borders of Greece, with long
geographical distance from the two metropolitan centres of Athens and Thessaloniki and the
‘traditional’ development axis of the country. Until recently, West Macedonia was also
characterized by inadequate transport infrastructure, a condition which has been significantly
improved due to the construction of the Egnatia Motorway (a TEN priority project) and some
of its vertical axes. The region, presents the lowest population density in Greece (Table 2) and
although it generates only 2.5% of the national GDP, it is ranked fourth among the Greek
regions in terms of wealth creation per inhabitant (Reid et al., 2012a).
Despite its peripheral character West Macedonia holds a strategic role in Greece in terms of
energy production and energy networks infrastructure. More than 50 years ago, massive
installations of the Public Power Corporation (DEI S.A.) were established in the area, triggering
the enlargement of the public sector and allowing for DEI to become the principal employer
and local economic motivator. More than 70% of the country’s total electric power is being
produced in West Macedonia and more than 50% is produced solely in the Regional Unit of
Kozani. Around 6.000 persons are permanently employed by DEI, while several subcontracting
companies are clustering around, further increasing the dependency of regional employment
on this specific sector. Apart from energy and lignite mining, the Region is also specialized in
fur manufacturing. Due mainly to these two production activities, the employment
percentage in the secondary sector has been diachronically higher than the country’s average
(around 8-10 percentage units).
In the crisis that started in 2008, West Macedonia proved to be extremely vulnerable. For
more than seven years now, the region feels the impact of both interrelated components of
the crisis: a) the financial and banking crisis and b) the debt crisis of the public sector. The
most visible signs are loss of GDP and high rates of unemployment (Figures 1, 2), cut-offs in
salaries, firms ceasing operations, as well as public sector’s retreat regarding specific social
services. West Macedonia is one of the four regions in Greece that were most severely hit by
the crisis, presenting the highest unemployment rate in the country in 2015 (28.5%), and the
third highest among the 270 NUTS2 regions of the EU27 (Source: EUROSTAT). Despite the
efforts and the progress made at a national level, West Macedonia still seems to be somehow
unable to return into a growth path.
In the light of the above, there is a widespread concern among policy makers and local and
regional stakeholders whether policies that are being adopted are the most appropriate ones,
especially considering the highly centralized governance system in Greece with limited
participation on behalf of the regional and local actors. This question becomes even more
crucial considering the major changes in the governance system at lower levels of public
administration (the Kallikratis reform
4
) and the challenges that emerge from the
conditionalities imposed for the new programming period (2014-2020). In the next section we
try to examine the success/effectiveness of previous policies implemented in West Macedonia
and assess their impact on the region’s trajectory and, eventually, on its ability for resilience.
Figure 1.
Figure 2.
4
In 2010, Law 3852/10 “The new architecture of Self-government and Decentralised Government
Kallikratis Programme” was issued, according to which the Regions (13 in total) and the municipalities
(333 in total) constitute the two tiers of local self-government.
A history of crises in the Region of West Macedonia
Over the last thirty years, West Macedonia faced a series of crises (Table 1). These were
general economic crises, with wider consequences and significant impacts upon the region’s
productive structure; sectoral crises, clearly visible only to those dealing with a specific
productive activity; and even crises caused by natural hazards. In all cases, the
transformations that resulted from these crises had a notable impact on the region’s ability
to resist against the consequences of the current economic downturn and thus determine the
context for regional resilience.
In the beginning of the 1990s, apart from the operation of DEI, a number of other significant
industries were present in the region, playing an important role in the regional economic
structure and employment. This productive pattern was severely hit in the mid -90s, by a
lasting de-industrialization phase, after the closedown of three of its largest industries: MAVE
- Asbestos Mines of Northern Greece S.A., AEVAL - Nitrogenous Fertilizers Industry S.A. and
ELSI - Skoumtsas - Hellenic Ferro-Metallurgy and Mining S.A.. The most visible consequence
of this crisis was the loss of thousands of jobs for the regional population (about 5.000 jobs
were lost counting for 10% of the total employment in the Regional Unit of Kozani) which
consequently affected the regional income. Despite these negative changes, protective
measures taken by the central government helped the Region to stabilize from the immediate
consequences of the crisis rather quickly. Specifically, DEI was compelled to absorb a large
part of the redundant workers, while a small share was given the opportunity for early
retirement. These policy measures, which were repeated in other crises later on, are believed
to have sufficiently dealt with the uppermost social unrest, although they did not manage to
confront the indirect effects of the crisis, e.g. the reduction of revenues of a large number of
suppliers, clients and service providers in the wider area. In addition, the rise of employment
in DEI, at levels which exceeded the company’s actual needs, not only increased the regional
specialization but also placed DEI in the people’s perception as the region’s main element of
resilience creating a dynamic for lock-in.
In 1995 a destructive earthquake hit the Regional Units of Grevena and Kozani. The
earthquake affected several small settlements in the area. More than 2,500 buildings in the
Regional Unit of Grevena and 7,500 in the Regional Unit of Kozani collapsed or were severely
damaged
5
. Consequently, a large part of the population moved away from the mountainous
areas and was directed towards the major urban centres. In trying to deal with this specific
crisis the state provided support to the affected areas in the form of two programmes/funds:
a) the Restoration Fund for Earthquake victims, which was a direct public aid for the
restoration of buildings damaged by the earthquake, and b) the Integrated Programme of
Reconstruction, a public investment fund for the reconstruction of the area which had an
immediate and significant impact on the regional GDP and employment. Although these
programmes were first designed and implemented to support only the struck by the
earthquake areas of Grevena and Kozani, later on, funds were also claimed and granted to the
other units of the region, as a result of local pressures to central government. Additionally,
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the affected population was given priority for jobs in the public sector, with DEI absorbing
again in most cases the employment pressures.
The provision of state aid for building new houses or restoring the ones that were damaged,
in addition to a series of other events (e.g. the arrival of migrants from Balkan countries which
occupied low remunerated and uninsured jobs in the construction sector, the rise in the
number of admissions in the region’s two higher education institutes and the increased flow
of students which rose the demand for housing to rent), affected the construction sector
which was overly enlarged. The disproportional growth of the sector continued until the
beginning of the current crisis. Today, construction is one of the most severely hit sectors
(Figure 3), while property ownership is being surcharged with the recently imposed unified
real estate property tax (ENFIA).
Figure 3.
During the last fifty years, West Macedonia faces a continuous environmental crisis which is
related to the local power production “for the benefit of the national development”. Lignite
mining and energy production activities had and continue to have- a major environmental
and spatial impact; the open-pit lignite mines and lignite-fired steam electric power stations
cause significant air pollution in addition to water table and ground water contamination.
DEI’s operations damage extended surfaces of agricultural land and induce the relocation of
settlements that are situated in close proximity to the exploitable lignite deposits, resulting to
a constant spatial restructuring of the area. It is quite characteristic that more than one-eighth
of the region’s surface is used for lignite mining (Chatzitheodoridis et al., 2008). The closure
of MAVE in the 1990’s added to the already environmental degradation, posing high
environmental risk of the abandoned asbestos mines.
So far, no direct intervention (national or regional) against environmental degradation has
been taken, apart from measures that mitigate the wider consequences of the operation of
DEI. For example, the mobilization of the Regional Units of Kozani and Florina, where the main
plants of DEI are located, led to the establishment of the so-called “Local-Resource”, a special
developmental fund granted by DEI (0.4% of the company’s annual turnover) to the local
authorities to finance projects related to local infrastructures, economic development and
environmental protection (Law 2446/96). Despite this specific initial objective, it turned into
a financial source to cover a wide range of other activities, unrelated to environmental
protection and upgrade. Furthermore, instead of using this fund for strategic measures of
added value for the region, it was fragmented into smaller scale projects with no significant
impact for the environment. Recently, its management has been moved from the Regional
Units to municipalities leaving no room for an integrated plan. Lastly, the closure of MAVE led
to significant spending on a longer term basis in order to contain the environmental risk of the
abandoned asbestos mines, mainly utilizing EU and national funds.
The region went also through a number of sectoral crises, with most notable being the ones
in the sector of fur. These were rather cyclical crisis following periods of growth and, in most
cases, independent of the overall state of economic development in the region. The sector of
fur constitutes a special case and an important activity in the Region (covering 8% of total
regional employment in 2011), especially in the Regional Units of Kastoria and Siatista where
for a long period of time- fur manufacturing was an institutionally protected activity
6
. This
area constitutes the third largest centre of fur production worldwide after Milan and Hong
Kong. There is high expertise and know-how in all relevant activities, such as treating (dressing
and dyeing of fur), manufacturing of articles of fur, trading and, more recently, fur bearing
animals farming. The sector was traditionally characterized by the existence of small family
enterprises (more than 85% are micro-SMEs) (Dagalidis, 2012), a fact that reflects some
degree of flexibility, but also many hours of labour per day with no social security for some
family members.
The most significant recent crisis that hit the sector of fur was that of the mid 1990s, after a
long period of excellent records. Entering a crisis in this specific period of time relates to the
emergence of the ecological movement on a global scale, the loss of certain market networks
after the collapse of the Soviet Union, the depreciation of the Russian rouble and the
increased competitiveness due to the insertion of new markets in other parts of the world,
such as China and Italy. The main consequences of the fur sector crisis was the increase in
unemployment, the decrease in the family income, the migration of several craftsmen to
other world markets, mainly China or Middle East, and also in some cases the increase of
illegal transactions with Western Europe -at least until the trade networks with Russia were
restored-.
In this crisis, the sector was partly supported by the central government, through preferential
regulations in loan repayment (ANKO et al., 2013). Other policy measures were orientated
towards training; in 1995 the Technical University of West Macedonia established the
Department of International Trade in Kastoria, while over the following years a number of EU
co-financed technical seminars assisted the transmission of expertise to younger generations.
However, the sector managed to successfully respond to the crisis and recover relatively
quickly through a number of ‘internal’ transformations: a) business rationalization, i.e. moving
from the small traditional family firms to larger, better organized ones, b) market expansion
(e.g. China, Middle East, Dubai etc.), c) diversification to new activities (such as the breeding
of fur bearing animals), and d) direct distribution to consumers. Additionally, the viability of
the sector has to be attributed to the high share of profits gained from this activity in earlier
periods of extensive growth (especially during the period 1960-1987) as well as to constant
high levels of demand from Russia.
Table 1.
The recent economic crisis
The recent economic crisis that started in 2008, which was triggered by the global economic
recession, hit primarily the private sector and, after the introduction of horizontal austerity
measures, the public sector, bringing a dramatic effect upon the regional economy (Table 2).
6
The Laws 1631/1939 and 1805/1951 and a number of subsequent ministerial decisions established a
preferential regime with an explicitly determined spatial limitation for the manufacturing of fur.
Table 2.
For years the regional market was dependent on the high salaries offered by DEI; the
shrinkage of this source of income (after a decrease in the number of employees and on the
level of salaries) (Figure 4) had affected all other sectors of the economy and especially the
tertiary, as millions of euros were pulled back from the market. Consumption was significantly
reduced and many commercial firms were forced to shut down. On the other hand,
entrepreneurs’ efforts to diversify their activities have been in most cases unsuccessful, partly
due to the unfavorable financial and innovation environment. Since 2008, over 20% of the
regional enterprises have ceased operations while, given the payment cuts and increased
taxation, there was around 40% decrease in their turnover (RIM 2012).
Figure 4.
Employment was significantly affected as entrepreneurs have been forced to dismiss
employees or at least- reduce their working hours. Furthermore, de-industrialization and
migration of labor intensive industries to neighboring low labor cost countries have added to
the already high levels of unemployment, leading many young people to search for
employment outside the region. Finally, the crisis created a highly instable entrepreneurial
environment. Due to the existing bureaucracy, high insurance contribution and taxation, along
with the total absence of bank financing, several enterprises have been forced to move their
headquarters abroad. It is estimated that more than 3.000 businesses have migrated from
Greece to other counties, mainly Bulgaria, Albania, Turkey, Cyprus, UK and the Netherlands
(Reid et al., 2012a). Oddly, it seems that the Region’s ‘peripherality’ until the last decade
played a decisive role in its development status; the low levels of accessibility for a long period
of time somehow seem to have protected the regional commercial activity against
neighboring competition or against the migration of the companies’ headquarters abroad.
Apart from the public sector and consumption related activities, the crisis also hit severely
construction (Figure 3). Besides, the construction sector was disproportionally grown during
the previous decades mainly due to loans and subsidies. Nowadays, new building licenses are
practically absent and the housing market is in stagnation phase, leading many construction
companies to suspend their operations. All activities providing inputs to the construction
industry were negatively influenced, such as marble construction (one of the most dynamic in
the past), wood construction, furniture, housing equipment etc. In total, economic activity has
fallen more than 80%. Between 2008 and 2014 the construction sector lost around 40% of
jobs, when up to that time was representing 7.5% of the regional employment (OP 2011-
2014).
On a policy level, the Region was unprepared to manage the incoming crisis and is late in
developing an alternative path of development. The artificial stability offered by DEI who
provided a ‘safe’ well-paid job and was absorbing the waves of previous crisis, functioned as
a hindrance to resistance and recovery. No integrated formal or informal plan exists so far for
overcoming the impacts of the crisis, and any studies and proposals developed by some
regional stakeholders maintain an ad-hoc character.
The current crisis has accentuated existing problems reflecting incorrect policy options of the
past. For example, the years before the crisis, the orientation of employment policies
operated in a distorted way. Despite the significant amount of allocated funds, the
programmes that were launched failed to create fruitful opportunities for long-term
employment in local enterprises, as they were rather used to cover temporal needs of the
local authorities’ personnel. The same mismatches also appear in measures aiming to enhance
entrepreneurship and regional competitiveness. Regardless of the opportunities provided
(developmental law, funding through the Community Support Framework etc), the private
sector has been benefited to a minimum degree as procedures for business funding are highly
bureaucratic and time-consuming. Also, discontinuities and lack of decentralization in regional
research and innovation policies did not allow the improvement of regional competitiveness
(Reid et al., 2012a). Finally, the lack of cooperation among regional stakeholders and also with
vertical levels of decision making led to significant contradictions in terms of the imposed
policies and measures.
The region can demonstrate only a limited number of successful cases of regional resilience
on behalf of single enterprises which were a corollary of individual efforts and not of concrete
targeted policies and measures. To these exceptions, one can add few successful projects
(such as tele-heating, waste management etc.) undertaken by regional stakeholders; these
reveal aspects of resilience and adaptive reorientation.
The region’s response to the current crisis is expected to come out of its strategy for the next
programming period (2014-2020). The recent administrative reform, but also the ex-ante
conditionalities posed by the European Commission provide the opportunities for a wider
participation of local stakeholders through emerging structures of collaborative governance.
The region has to develop a vision much different than the one existed in the past, and find
its role in the post-lignite era.
Concluding Remarks: What has been learnt from the region and its
trajectory?
The case study analyzed before, exhibits in a remarkable way the significance of policies for
the study of regional resilience and helps us draw some general remarks which may be
relevant also to other areas. First of all, it is evident that policies affected significantly the
future of the region and the level of its resilience. They are part of the regional history which
shapes the evolution and development of its ecosystem. The policies implemented in West
Macedonia throughout the years, influenced the scale of the problems caused by the current
crisis and the prospects for recovery. The public sector with its protectionist interventions -
through either DEI or the provision of state aid of various forms- succeeded in the
achievement of a temporary resilience. However, the region’s systematic inability to generate
bottom-up initiatives and nurture a culture of co-operation caused its vulnerability in the
current crisis.
West Macedonia is a region with its main economic activity being of national importance,
given that DEI, the main regional employer, is controlled by the Greek government, which
owns the majority of the issued shares. Despite this, the company receives significant
influences from the regional level, such that becomes a pawn of regional players in their effort
to attract employment seats and funding from the central government. The main implications
on decisions regarding its structure, operation and decision making comes from DEI’s union
of employees (GENOP) and its significant influence on the political level. For example, the
process for the company’s privatization has remained stagnant for years, regardless of the
need to comply with the Commission’s rules for liberalizing the energy market (which is a state
monopoly in Greece) and the conditions of the EU/ECB/IMF loan package.
Also, the Region’s structural features and specificities have to be associated with and
discussed in relation to the country’s administrative and governance tradition. The
characteristics of public policy styles in Greece include hierarchical and bureaucratic public
administration, central decision-making processes, overlapping of jurisdictions, lack of
decisive jurisdictions at the lower tiers of government and dependence of the local authorities
on central government regarding financing. These structures affect the way public policy is
implemented at the regional/local level. It seems that policy formulation, programming,
planning and implementation are somehow detached from the local community. The centrally
designed and implemented development programming framework since the end of the
1980s, accompanied by the limited involvement of the regional self-government authorities
and stakeholders, has led to the absence of a comprehensive and long-term development
vision for the region. Although it can be accepted that national policies can be very effective
in stabilizing the region and can be considered a first step for resilience, it is not sufficient.
Central government may prove capable of responding quickly to new circumstances, yet,
regional authorities and stakeholders have better grasp of the weaknesses and opportunities
that exist in the region. Thus, any macro-economic efforts for stabilization and recovery
forwarded by the central government should be complemented by focused policies on the
regional level that would include specific measures and strategies for the region based on the
local knowledge of regional specificities. Nevertheless, the idea of regional authorities
obtaining decisive jurisdictions regarding their own strategy is partially questioned, as this
implies that the problems will be shifted to the actual capacities, objectivity and impartiality
with which the regional policy decision-makers will serve the needs of the local community.
Multi-level governance means bringing various institutions and organizations at all levels
together. Not only it involves cooperation and complementarities between different levels of
government, but also the creation of policies within networking, involving the public sector,
regional stakeholders, private initiatives and the citizens themselves. Practice shows that
programs in the Region that have been initiated by local stakeholders have been far more
efficient in creating conditions of resilience in the area. Additionally, collective actions of social
solidarity, characterized by increased interest in volunteering and participation, are
considered to be a positive impact of the current economic crisis. However, these programs
and social structures alone are not capable of strengthening regional resilience, partly because
of the lack of coordination of all similar actions into more comprehensive and sustainable
initiatives, which would facilitate the design and implementation of bottom-up policies.
Overall, it is the net of local actors who needs to be empowered in the pursue of developing
a sustainable locally based strategy. Simultaneously, there is a clear need for integration
among different levels of administration and management in order to ensure policy
coherence.
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Figure 1. Evolution of GDP per inhabitant (PPPs) (EU, Greece and West Macedonia). Source:
Eurostat
Figure 2. Evolution of unemployment rate (EU, Greece and West Macedonia). Source:
Eurostat.
Figure 3: Changes in employment based on sectors of economic activity in the region of
West Macedonia, 2008-2011 (%). Source RCM and EYSEKT (2013)
0
5000
10000
15000
20000
25000
30000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
EU 27
Greece
West Macedonia
0
5
10
15
20
25
30
35
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
EU 27
Greece
West Macedonia
Figure 4. Change in the total number of DEI employees during the period 2008-2013. Source
DEI (2013, 2011, 2009)
Table 1. A history of crises in West Macedonia and policy responses
CRISIS
POLICY RESPONSE
IMPACT
De-industrialisation
(90s) - three of the
Region’s largest
industries ceased
operations
Decrease of regional income
Protective measures by
the central government:
absorption of redundant
workers by DEI & early
retirement schemes
Increase of regional
specialization
A destructive
earthquake in 1995
Increased urbanization
State support to the
struck areas through
direct funding
Enlargement of the
construction sector
Increase in real estate
ownership which was
Affected population given
priority for jobs in the
public sector (mainly DEI)
later on surcharged with
severe taxes
Environmental crisis
after the closure of
MAVE / Continuous
pressures to the
environment since
the inauguration of
DEI plants
Loss of agricultural land
Relocation of settlements
Significant environmental
degradation (air pollution,
water table and ground
water contamination etc)
EU and national funded
programmes aiming at the
restoration of the
asbestos mines
A Special Developmental
Fund named ‘Local
Resource’ was granted to
the affected areas
Fragmentation of the
fund to smaller scale
projects with no true
environmental impact
Crisis in the sector of
fur during the late
1990s
Migration of several
craftsmen
Favored state regulations
for loan repayments
Establishment of the
Department of
International Trade
Technical University of
West Macedonia
Training seminars for
transmitting the expertise
to younger generations
Limited impact of
policies
Resilience was mainly
the outcome of internal
transformations
Economic crisis since
2008
Shrinkage of the public
sector and of the disposable
income
Closure of commercial
enterprises/ Migration of
enterprises abroad
Collapse of construction and
complementary activities
No specific policy
response at the regional
level/ no integrated plan
for overcoming the impact
of the crisis
Strategy through the next
programming period
2014-20
Table 2. Main figures regarding West Macedonia, Source: EUROSTAT
2008
2014
Change
(%)
Country’s population
11,060,937
10,926,807
-134,130
-1.2
West Macedonia population
286,696
278,706
-7,990
-2.8
Population aged 15-64
181,426
176,308
-5,118
-2.8
Employment (Total)
104,500
82,500
-22,000
-21.1
Employment (15-64)
102,800
81,.600
-21,200
-20.6
Primary sector
18,300
15,100
-3,200
-17.5
Secondary sector
33,100
20,400
-12,700
-38.4
Tertiary sector
51,500
46,000
-5,500
-10.7
Unemployment (15-64)
14,900
31,400
16.500
110.7
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Over the past few years a new buzzword has entered academic, political and public discourse: the notion of resilience, a term invoked to describe how an entity or system responds to shocks and disturbances. Although the concept has been used for some time in ecology and psychology, it is now invoked in diverse contexts, both as a perceived (and typically positive) attribute of an object, entity or system and, more normatively, as a desired feature that should somehow be promoted or fostered. As part of this development, the notion of resilience is rapidly becoming part of the conceptual and analytical lexicon of regional and local economic studies: there is increasing interest in the resilience of regional, local and urban economies. Further, resilience is rapidly emerging as an idea 'whose time has come' in policy debates: a new imperative of 'constructing' or 'building' regional and urban economic resilience is gaining currency. However, this rush to use the idea of regional and local economic resilience in policy circles has arguably run somewhat ahead of our understanding of the concept. There is still considerable ambiguity about what, precisely, is meant by the notion of regional economic resilience, about how it should be conceptualized and measured, what its determinants are, and how it links to patterns of long-run regional growth. The aim of this article is to address these and related questions on the meaning and explanation of regional economic resilience and thereby to outline the directions of a research agenda.
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This article develops an evolutionary framework of regional resilience with a primary focus on the structural properties of local knowledge networks. After presenting the network-based rationales of growth and structuring of clusters, we analyze under which structural conditions a regional cluster can achieve short-run competitiveness without compromising long-run resilience capabilities. We show that the properties of degree distribution (the level of hierarchy) and degree correlation (the level of structural homophily) of regional knowledge networks should be studied to understand how clusters succeed in combining technological lock-in with regional lock-out. We propose simple statistical measures of cluster structuring to highlight these properties and discuss the results in a policy-oriented analysis. We conclude showing that policies for regional resilience should focus on ex-ante regional diagnosis and targeted interventions on particular missing links, rather than ex-postmyopic applications of policies based on an unconditional increase of network relational density.