Regional development policy: the case of Castilla y León and the savings banks

Regional development policy opens the doors to new forms of intervention, economic regulation and job creation - a process that has been becoming increasingly important in Spain over the last few years. An October 1997 agreement between the Government of Castilla y León and the savings banks is an example.

The Regional Government of Castilla y León (Junta de Castilla y León) and the Federation of Savings Banks (Federación de Cajas de Ahorro) have finally reached an agreement after several months of discussion. Some months ago the Regional Government, represented by the People's Party (Partido Popular), initiated the creation of an investment company to which savings banks would contribute 80% from their own funds. The Government also planned to regulate the future activity of such organisations. The aim of the Government was initially to encourage the development of strategic economic sectors for the region and to generate employment in a region with a tradition of emigration. A particular objective was to promote the food and agriculture industry, sugar production and the transport network.

Initially, the Ministry of Economy of the Regional Government intended to express its project in the form of a decree. This unilateral measure led to strong protests about the objectives and the procedure used. The savings banks rejected it completely, believing that it threatened their autonomy and the role of their boards of directors as decision-making organs in the field of investments. Another point of conflict was the Government's unilateral definition of the strategic sectors.

The Spanish Federation of Savings Banks (Confederación Española de Cajas de Ahorros, CECA) also expressed its disagreement because over the last few years it has made a greater contribution to financing the public sector than the banks. It therefore requested a judgment by the Bank of Spain (Banco de España) and the Securities and Exchange Commission (Comisión Nacional del Mercado de Valores).

The UGT and CC.OO trade unions denounced the initiative as unilateral interference by the Regional Government and protested against its threatening tone and intention to act by decree. Though there was bitter discussion during the summer of 1997, the trade unions and left-wing parties in the opposition - PSOE and IU- disagreed more with the procedure than with the content, maintaining that this type of discussion should be held in the Regional Parliament, and not in the press or through the threat of issuing a decree. There was therefore a wide consensus on rejecting the decree, and in the end this was not the solution adopted.

Finally, in October 1997 an agreement was reached which was the result of a consensus between the savings banks and the Regional Government that - in the words of IU - "the savings of the community should favour the region". The framework agreement modifies some points of the initial objectives of the Regional Government. For example, it was accepted that the rural savings banks will participate only in the investments of the agriculture and agribusiness sector and that in the future investment company decisions will be reached by qualified majority. Furthermore, it was agreed that the maximum investment ceiling per savings bank will be 80% of their own funds. A joint commission has been set up to define the strategic sectors and to determine the amounts that may be invested.

The Regional Government now joins the increasingly significant list of regional governments which have been trying out intervention policies to create jobs:País Vasco, La Rioja, Aragón andAndalucía. One reason for this is that the market does not by itself correct regional economic imbalances and inequalities automatically.