Additionality and regional development: are EU Structural Funds complements or substitutes of national Public Finance?

This paper deals with the effects of the transfer of additional funds on the real economy of recipient countries, in particular the European Member States. The intended and unintended effects of additional funds on national public finances and, ultimately, economic performance are discussed. Understanding the real effects of additional public funds and the possible complementarity or substitutability with national public finance is important for shaping the policies for the allocation of Structural Funds. Verification of additionality plays a role in ensuring that additional funds are used to effectively complement national expenditure programmes. In the case of the European Union, it is widely recognised that the current verification mechanism is affected by weaknesses, that prevent it from providing reliable and useful data to effectively assess additionality. For this reason, the paper suggests the European Commission to move away from the current verification approach and to adopt a new one that could more effectively assess to what extent the Structural Funds complement national investments.