Reforming suo tempore : Exploring the unintended consequences of the European Union’s ‘reform actorness’

Introduction

Reforms rarely evolve in isolation from other policy programmes and reforms; thus, one reform process feeds into others, often to the surprise of policy makers, bringing about a series of unintended effects (Egeberg and Trondal, 2018: 19–20). The European Union (EU) is a prominent reform actor, whose reform-inducing activities interweave dynamically and multi-dimensionally with its member states (Börzel and Risse, 2012; Börzel et al., 2017; Exadaktylos and Radaelli, 2015; Exadaktylos et al., 2020; Radaelli, 2020). The EU has been attributed normative, regulative and cognitive power (Laffan, 2001) capable of encouraging or imposing significant policy changes in its member states (Beyer, 2018; Leuffen et al., 2013; Thomann and Zhelyaskova, 2017). This transformative potential of the EU is associated with the intended outcomes of the EU policy initiatives. But does the EU’s ‘reform actorness’ have unintended effects, and what determines their magnitude, intensity, content and pace? How may the EU alter the outcome of other domestic reform efforts, partly or totally, without meaning to do so?

Our starting point for addressing these questions is the assumption in the public policy literature that the availability of resources is a key parameter in determining reform success (Hill, 2003; Sabatier, 1986; see also Rodrick, 1996 for economic policy reform). Thus, the straightforward expectation would be that EU-driven reforms (‘source reforms’) which curtail the resources available jeopardise the success of other domestic reform efforts (‘target reforms’), generating negative spillovers and having adverse unintended consequences. We add more nuance to this argument by positing that the unintended consequences of an EU-driven reform depend both on the kind of resources they impact upon and the domestic cycles in economic and public policy-making. We distinguish between the financial and non-financial resources available domestically, with the latter comprising inter alia human capital, institutional and regulatory power, as well as ideational shifts. How the economic and public policy-making cycles condition the scope and size of the unintended effects will depend on the kind of resources impacted on.

Our empirical focus is on the intersection between the fiscal domain and domestic governance architecture in Greece. More specifically, considering the impact of the fiscal crisis on public administration (Ladi, 2014; Lampropoulou, 2020; Randma-Liiv and Kickert, 2017, 2018), we examine whether the country’s fiscal consolidation odyssey in the period 2010–2015 had any unintended effects on the most ambitious Greek administrative reform plan (‘Kallikrates’), which was launched in 2010. The Kallikrates reform was the output of a long period of preparation and political osmosis before the outbreak of the economic crisis. It was heavily encouraged by the EU, but its implementation evolved in parallel with the domestic fiscal consolidation reform process, which was associated with hard conditionality measures in the context of the bailout agreements between the Greek government and the EU. Given the significant curtailment of financial resources during this period, it would be reasonable to hypothesise the existence of a negative spillover impact, which annulled the reform potential of Kallikrates in practice. However, we find that the increase in the non-financial resources that occurred as a by-product of the fiscal consolidation process compensated in part for the reduction in the financial resources. The stages of the economic cycle (severe recession and contraction) and the public policy-making cycle (formulation and early implementation) led inevitably to the ambitious reforms being downgraded, though not totally eradicated. Several elements have survived and now guarantee the fiscal viability of local and regional administration in Greece.

Our analysis is based on primary and secondary sources. The former comprises seven semi-structured interviews conducted with Heads of subnational institutions and state officials during the implementation phase of the two reforms. In these interviews, our primary objective was to identify the intertwining of Kallikrates with the concurrent fiscal adjustment reforms. The interviews were conducted anonymously and were semi-structured in nature, providing the interviewees with space and time to elaborate on selected issues. The most significant insights from some of the interviews were cross-checked and validated by asking other interviewees to confirm or comment on them. Our primary sources also included reports published by central government, subnational and European authorities on various aspects of both the reforms examined.

This article is organised as follows: the next section elaborates on the concept of the EU-induced unintended consequences and the core determinants that condition their impact on the domestic policy-making level. After that, we present the basic features of the Kallikrates governance reform, along with the fiscal conditionality measures applied. Then, based on the empirical evidence, we discuss our findings on the interlinkages between the two reforms under examination and assess how the EU’s ‘reform actorness’ leads to positive and negative unintended consequences. The concluding section summarises the key insights of our analysis.

Economic and policy cycles: Key determinants of the EU’s unintended consequences

The EU is an exogenous catalyst for change which generates adjustment pressures not only in the domestic arenas of its member states, but also in its broader neighbourhood (Freyburg et al., 2009; Phinnemore and Warleigh-Lack, 2009). In that respect, ‘formal conditionality’ relates to incentives provided to states in return for fulfilling prescribed conditions (Blavoukos and Pagoulatos, 2008). This type of exogenously driven pressure emanating from the EU is especially evident after ‘critical junctures’ in the domestic policy-making arena, like policy or economic crises (Featherstone, 2011, 2015; Pagoulatos, 2012).

An implication of such EU-sparked adjustment reforms is that they often have unintended consequences. The very essence of the concept of unintended consequences entails an inherent paradox in the process of modernisation, since policy implementation may not only lead to the intended positive outcomes: they may also generate – mostly negative – unintended effects (Hood et al., 2010). The unintended and unanticipated effects of reform policies have long been an object of study in the social sciences without any distinction between them. In fact, it is doubtful whether a clear distinction between ‘unanticipated’ and ‘unintended’ consequences can even be drawn (de Zwart, 2015). An early analysis distinguished between the side-effects which impact directly on the actor(s) involved and those that impact on other persons, arguing that social structures, culture and civilisation play a mediating role. It stressed that ‘uncontemplated’, ‘unintended’ or ‘unforeseen’ consequences may not necessarily be undesired from the actor’s viewpoint (Merton, 1936). Thus, from the very beginning of the academic discussion on these effects, it has been clear that they can have both a negative and a positive dimension (Becker and Linder, 2021). Broader typologies and more detailed categories of unintended consequences have been offered up, which classify them according to the degree to which they were anticipated, intended, welcomed, as well as to the magnitude of their impact (Perri 6, 2010; Hirschman, 1991; Klitgaard, 1997).

The unintended consequences of policy reform efforts have received only marginal attention in EU studies. Even though scholars strive to thoroughly examine the EU impact on the domestic polity, politics and policies by applying the mechanics of Europeanisation, their assessment overlooks the issue of unintended consequences, especially negative ones. There are a few exceptions, which consider the issue en passant in various policy fields (Börzel and Pamuk, 2012; Dimitrakopoulos, 2001; Krasnodębska, 2018; Murphy, 2013; Török, 2020). However, very few studies focus on it and offer more profound insights. Burlyuk (2017) provides an analytical framework for, and classification of, unintended consequences, which she then applies in different policy areas such as neighbourhood policy, migration and trade. According to her analysis, the concept can fruitfully advance our understanding of the EU’s overall performance when it comes to anticipating and coping with unintended consequences of this sort (Burlyuk, 2017: 1022). Similarly, Burlyuk afnd Noutcheva (2019) underline three basic features of the unintended consequences of EU (in)action: namely, what they manifest, why they occur and how they are managed. Focusing on cases relating to the EU’s external affairs, they call for the concept to be integrated further when purposive EU (in)action is being considered, warning against the casual and rather superficial way in which it has been treated thus far. Finally, Koch and Burlyuk (2020) draw on the policy learning literature to examine the anticipatory component of the negative unintended consequences of EU minerals legislation.

‘Reform actorness’ captures the EU’s involvement in domestic arenas, where it imposes or induces reforms, either directly through conditionality agreements or indirectly by framing domestic beliefs (Kratochvíl et al., 2011). However, such actions may produce side-effects for other reforms by impacting, primarily, on the domestic resources available for their implementation.

Hence, resource availability is the mechanism for analysing the unintended consequences of an EU-induced reform on another policy area. The impact of these consequences depends on the domestic economic and public policy-making cycle, as will be analysed further below. Figure 1 offers an overview of our analytical framework, capturing and visualising its main elements.

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Figure 1.

The unintended consequences of EU reform actorness.

It is generally expected that increasing resources create an environment more conducive to reforms, whereas decreasing resources hinder the implementation of a reform. However, this relationship is not as straightforward as it seems and does not tell the whole story. More resources do not teleologically lead to successful reforms, and having less resources is not tantamount to policy reform failure. To be more specific, an increase in the available domestic resources as a result of an EU-induced reform in a different field may bring about the acceleration and more rapid completion of the reform in question (positive effect), but it may also lead to the reform being redirected and possibly derailed (negative effect). For example, a structural reform in the agricultural production base of one member state resulting from a revision of the Common Agricultural Policy (CAP) may release land and financial resources that can contribute to the completion of an environmental reform. However, in the same example, the CAP reforms may release human resources from the farming sector, who then move to other sectors of the economy, often through an urbanisation process. This part of the working force will need training and reskilling, increasing pressure on – and perhaps derailing – the domestic vocational training system. In the same vein, a decrease in the domestic resources available due to an EU-induced reform may lead to a reform path of greater efficiency (positive effect), since resource scarcity may lead to more efficient and productive policy option alternatives being sought. Or it may lead to the abandoning of a reform (negative effect) due to the limited resources available. For example, an EU-driven fiscal austerity programme may lead to the digital modernisation and transformation of the domestic public sector in an attempt to make better and more efficient use of the fewer resources available. Alternatively, it may lead to a public administration reform being shelved and abandoned, due to a lack of financial resources to support it.

To unpack the unintended effects of EU-induced reforms still further, we also need to distinguish between financial and non-financial resources. The former comprise the funding flows in the main, while the latter consist of the institutional, ideational and human resources that contribute to the eventual success of a reform initiative. EU-induced reforms may curtail or increase both categories, or have a mixed effect. A ‘mixed effect’ example is the combination of a cut in funds in a given policy area accompanied by the strengthening of the oversight and institutional regulatory framework in the same area. In this example, the loss of financial resources is compensated for by an increase in non-financial resources.

The outcome of EU interventions made through the resource-based mechanism described above is contingent upon the domestic economic and policy-making cycles. For analytical purposes, the economic cycle is divided into two broad periods (‘expansion and growth’ and ‘recession and contraction’) rather than the usual three (expansion, recession, contraction) found in the economic cycle literature (Burns and Mitchell, 1946). In turn, the public policy cycle is divided into three broad categories – ‘agenda setting’, ‘formulation and early implementation’ and ‘late implementation stage’ – although four or more are usually found in the literature (Hill, 2005).

During a period of ‘expansion and growth’, the available resources are bountiful rather than scarce. A positive unintended effect on resources means their further increase, most probably enhancing the success potential of the ‘target reform’; however, it may also lead to a derailment of the ‘target reform’. For example, relaxing the Stability and Growth Pact (SGP) rules on fiscal prudence releases national budgetary resources that are used to hire staff for the tax administration agency rather than for digitally modernising the agency. In case of an adverse unintended effect on resources caused by the ‘source reform’, the additional resources available in this growth period may compensate for the losses, thereby ensuring the viability of the ‘target reform’. If the ‘target reform’ is at the agenda-setting phase, the extra resources may provide the oxygen required to prevent its suffocation. The more advanced the stage the policy-making has reached, the smaller the magnitude of the adverse effect will be. At the late implementation stage, when the ‘target reform’ is largely embedded, only minor adjustments to content and pace should be expected. In the previous example, if the digital transformation of the tax agency is well underway, the chances of the reform being shelved will be significantly reduced.

During a period of ‘recession and contraction’, positive unintended effects may save the life of the ‘target reform’, whereas negative unintended effects will most probably aggravate the crisis. If the ‘target reform’ is still at the agenda-setting stage, it is highly likely to be abandoned, since the overall scarcity of resources will hamper any discussion of its implementation. As in the period of expansion and growth, the more advanced the stage of the policy cycle is, the smaller the adverse effect will be in magnitude. At the formulation and early implementation stage, the ‘target reform’ may not be abandoned altogether, but less costly alternative implementation options may be selected, leading to the substantial downgrading of the specific reform. For example, new institutional bodies and technocratic agencies established in periods of economic contraction and fiscal reform may not be staffed with the appropriate specialised personnel, thus compromising their reform potential. Finally, at the late implementation stage, the magnitude of the adverse effect is expected to be lower, since the considerable degree of reform embeddedness may have already produced internal economies of scale and ‘lock-in’ effects.

To sum up our analytical framework, we posit that an EU-induced ‘source reform’ may have a positive, negative or mixed unintended impact on a domestic ‘target reform’ through its effect on the available financial and non-financial resources. The phases of the economic and public policy-making cycles will condition the end result of the ‘target reform’.

In the next section, we apply this framework to analyse the intertwining between the Greek fiscal reforms that followed the bailout agreements of 2010–2015 and the Kallikrates reforms introduced in 2010 as Greece’s most far-reaching and ambitious reform of governance. This reform was originally designed in an ‘expansion and growth’ economic environment, but was later formulated and implemented in the context of resource scarcity and harsh conditionality measures during an extreme ‘recession and contraction’ phase in the Greek economic cycle. This case is thus an example of a major EU-driven fiscal reform co-evolving and interplaying with an emblematic institutional governance reform.

Transformations in parallel orbit: Kallikrates and fiscal reforms in Greece

In 2010, the Greek government launched the Kallikrates plan (Act 3852), fundamentally rearranging the architecture of subnational governance in the process. The plan constitutes the most ambitious reform plan ever introduced within the Greek administrative apparatus (Interview ii). The agenda-setting stage of Kallikrates was formally initiated in the second half of the 2000s, before the economic turmoil that followed the outbreak of the global financial crisis. Subnational actors, such as the central association of local authorities (KEDE in Greek), held regular top-level meetings at which the idea of the substantial institutional and financial empowerment of local and regional authorities (henceforward ‘subnational authorities’ – SNAs) was proposed. Scientific institutions associated with the SNAs also issued reports with facts and figures, offering technical expertise on the issue and arguing in favour of a radical governance reform. Even central state authorities recognised the need to upscale and promote the role of sub-state institutions with a view to enhancing the financial efficiency and organisational effectiveness of local and regional governance (Ministry of the Interior, 2010).

In short, the Kallikrates plan entailed significant changes at the local, regional and state-decentralised levels. At the local level, the 1034 municipalities and communities were consolidated into 325 new municipalities. Municipal developmental companies and other local entities were merged, substantially reducing their number from approximately 6000 to fewer than 2000 bodies. The new larger – in size and population – municipalities acquired new competencies in several policy areas (e.g. the environment, health, cultural and sports activities, local infrastructure and development) along with extra administrative staff. According to data, transferred responsibilities in local urban planning, social protection and student transport led to the transfer of nearly 13,000 employees from state to local authorities (Dexia, 2012: 20). At the regional level, the 13 state regions integrated the 54 prefectures, rearranging the organisational and territorial structure of the second level of SNAs. The 13 new and autonomous regions acquired new responsibilities, along with personnel in various policy fields (e.g. the environment, regional infrastructure). Most importantly, regions were made solely responsible for administering the regional operational programmes that are co-funded by the EU’s structural funds. These regional programmes accounted for slightly more than one-third of the total EU co-funded projects in Greece for the 2007–2013 period and facilitated the mobilisation of the SNAs (Oikonomou, 2020: 365–367). At the state-decentralised level, seven new decentralised administrations were established to replace the former state regions and given state competencies across policy domains such as the environment, civil protection and migration. All these administrative reforms were to be backed financially by both state and EU funding sources, with two operational programmes (‘ELLADA’ and ‘AKSIA’) planned to support them.

In Greece, the transfer of power and resources has traditionally been rather hesitant (Spanou, 2012: 182). This was the motivation for Kallikrates, as a bold and ambitious experiment intended to tackle and change the classification of Greece as one of the most centralist states in Europe (Hlepas, 2020: 256). Drawing on the logic of economic rationalisation and cost-saving, as well as soft EU-induced adjustment pressures, the Kallikrates reform set out to strengthen the local and regional level of governance. This empowerment would occur through the modernisation of the SNAs and the streamlining of their operational and functional capacities, which would bring about internal economies of scale. The EU framed subnational actors’ beliefs and expectations by promoting the concept of multi-level governance and encouraging local and regional associations to support efforts aimed at further decentralisation (Committee of the Regions, 2009; European Commission, 2001). Similarly, references to the treaty of Lisbon, the subsidiarity principle and the concept of multi-level governance are all prominent in Kallikrates’ introductory report (Ministry of the Interior, 2010). Table 1 summarises the main features of the reform plan and their core rationale.

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Table 1.

Snapshot of the Kallikrates reform.

Main reform measures per sub-state level of governance	Rationale
- Extensive amalgamations in local government; reduction of the number of local developmental enterprises; transfer of competencies and staff - Establishment of the largest (in size and population) regional authorities ever in Greece - New decentralised institutions with diminished responsibilities (the ‘hollowing out’ of decentralised state authorities)	- Top-down soft Europeanisation pressures; internal economies of scale - Building institutional and administrative capacity - Promoting subnational participation in European structural policy - Advancing the subsidiarity principle

Source: Authors’ own elaboration.

However, no sooner had Greece started to implement this ambitious governance reform initiative than its economy slipped into a recession, which was followed by the deepest contraction phase in its economic cycle since World War II. Between 2009 and 2013, the Greek economy experienced a cumulative shrinking of 28.6% of its gross domestic product (European Commission, 2014: 28). Within this period, the country ran soaring fiscal deficits, and its public debt skyrocketed, becoming totally unsustainable. As well as infringing on SGP rules, the country found itself on the brink of default and had to adopt extremely harsh fiscal consolidation measures. These measures were the corollary of three financial memoranda (2010, 2012, 2015) negotiated with the country’s international creditors (the so-called ‘Troika’, comprising the European Commission, the European Central Bank and the International Monetary Fund – for an overview, see Zahariadis, 2015). ¹ In fact, the three memoranda paved the way for the introduction of a series of structural reforms and other adjustment measures that made all tranche disbursements conditional upon the implementation of the reforms.

The overarching logic of the three adjustment programmes was the modernisation of the Greek state through much-needed reforms across public institutions and a multitude of policy sectors, increasing their administrative effectiveness and economic efficiency and reducing the regulative burden in the economy. In particular, the first two memoranda introduced a broad mix of highly demanding and far-reaching reforms aimed at rapidly decreasing financial pressures and reducing unsustainable public debt. In 2015, persistent financial needs in conjunction with the insufficient implementation of the reforms laid down in the first two memoranda (the implementation rates were 80% and 66%, respectively; Katsikas et al., 2018: 27) led to a third bailout programme that allowed for a smoother fiscal adjustment (Pagoulatos, 2018: 12). Interestingly, governance reforms were downplayed in comparison to the two previous programmes, since particular attention was paid after 2015 to the banking sector, market liberalisation and the privatisation of state assets.

Reforming suo tempore: Governance and fiscal consolidation reforms intertwined

Although Kallikrates and the fiscal consolidation reforms had a different focus, they became highly intertwined in their implementation stages. The urgent need for fiscal consolidation in order to avoid state bankruptcy affected SNAs as much as the broader public sector. The first two memoranda explicitly referred to SNAs with implementation measures which included drastic financial cuts and personnel layoffs. In addition, the SNAs’ net wealth decreased further as a corollary of the ‘haircut’ imposed on Greek sovereign bonds in 2012 (the second adjustment programme), since SNAs were forced by law to invest in Greek sovereign bonds (Zahariadis, 2015: 179).

The two fiscal adjustment programmes impacted negatively on both the financial and non-financial resources of the Greek SNAs, affecting both funding flows to SNAs and their modus operandi (Lippi and Tsekos, 2019). Focusing on the financial resources first, the most significant impact saw the blocking of new financial resources whose transfer from the central authorities to SNAs was provided for in support of the implementation of the Kallikrates plan. What is more, even the usual flow of funds to SNAs (the so-called Central Autonomous Funds–CAF) became highly inconsistent, with a huge reduction in state subsidies to SNA budgets, which reached 60% of 2009 levels in 2013 (Hlepas, 2016: 284). This reduction was crucial for the survival of SNAs, since almost 70% of their revenues stem from this subcategory of revenues. Thus, in addition to new financial resources not being transferred to SNAs to perform their newly acquired Kallikrates-related tasks, the usual flows were also curtailed.

Furthermore, since the Kallikrates’ reforms yielded savings of 0.5 billion euro in 2011 and an additional 1 billion euro for the years 2012 and 2013, mainly through the extensive merging of municipalities and the closure of approximately 4500 subnational entities (mostly local companies), the government committed to reduce net transfers to SNAs to secure these savings (European Commission, 2010: 73). As a result, after January 2011, the newly established regional and local authorities had no choice but to come to terms with the idea of a significant shift in tasks and burdens, without the analogous transfer of resources. In other words, new competencies were allocated to SNAs via Kallikrates, but they did not come with financial support, as originally proclaimed and projected in the reform package. This led to an unintended consequence: the heavy undermining of the SNAs’ capacity to implement Kallikrates (Interview ii).

Graph 1 provides an overview of the financial resources of Greek sub-state authorities from 1992 onwards. The financial empowerment is evident, particularly for local government, which gained most of the financial resources, followed by regional authorities (regardless of their territorial configuration over the course of the period), thus reflecting the relative institutional power in the sub-state self-governed administrative field. State-decentralised authorities have received the same amount of funding down the years. However, the onset of the Greek fiscal crisis and the ‘recession and contraction’ economic phase that followed signalled a sharp reduction in the revenues of the SNAs in the early and late implementation period of the Kallikrates governance reform (2011–2015).

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Graph 1.

Financial resources of the SNAs, based on state budgets.

Moving on to the non-financial component of resources, SNAs were also affected in terms of their personnel and constitutional autonomy. The extensive budget cuts and need for cost minimisation measures led to an operational re-organisation and to staff reductions; the latter was a requirement of the second adjustment programme especially. Strict quotas for the hiring of permanent personnel (initially 1:6, which entailed replacing only a small portion of retiring employees) in the broader Greek public sector were adopted from 2011; at the subnational level, however, hiring halted altogether in practice. Indicatively, as a result of the wage cuts and the layoffs of specific categories of personnel, the share of wages in total expenses fell from 45.6% to 38.5% between 2011 and 2015 (Cohen and Hlepas, 2017: 138–139). Which is to say there was another negative unintended consequence: namely, SNAs did not only have to undertake newly transferred competences without the necessary funding, but also had to operate with fewer human resources (Interviews i, ii). Obviously, this resulted in a significant drop in the quality of many services old and new provided by the local and SNAs; this largely annulled the rationale for the Kallikrates reform, which was to improve the quality of the implementation of delegated tasks.

It also constituted a harsh violation of the SNAs’ constitutionally protected administrative autonomy, as enshrined in Article 102 of the Greek Constitution. The fiscal consolidation reform measures in the two adjustment programmes released powerful centripetal dynamics, which asymmetrically favoured the re-concentration and re-centralisation of power in the Ministry of the Interior. Thus, a constitutionally proclaimed governance reform was essentially put on ice, and the SNAs’ institutional role within the newly envisaged architecture of Greek subnational governance was substantially weakened (Interviews i, ii). This Gordian knot is evidenced by the failure to establish and render operational the autonomous supervisory authorities which were provided for to undertake administrative oversight over the regional and local levels of governance (Interview vi). These bodies were designed to function with increased professionalism and with highly qualified personnel. Most importantly, they would provide a control mechanism independent of the Ministry of the Interior, thus minimising potential top-down political interference. However, their launch was halted, not only due to the lack of financial resources but also because they would enable SNAs to escape the tight administrative grip of the central state authorities.

Moving on to the positive effects, the fiscal adjustment reforms substantially increased the SNAs’ operational efficiency and effectiveness. The team of experts in local and regional governance issues (or Task Force for Greece) formulated in April 2012 contributed – to some extent, at least – to progress in this direction. Along with this, experts from Germany provided significant technical assistance to the Greek SNAs, which was aimed at enhancing their administrative capacity in fields such as operational planning, financial management, the utilisation of the EU’s structural funding and management of their property (European Commission, 2012; Interview vii).

Furthermore, in terms of control and monitoring, a strict financial oversight mechanism (the ‘Observatory of the financial autonomy of SNAs’) was introduced in 2013, given the need for closer supervision of SNA expenditures and overall budget performance, as prescribed in the second adjustment programme, in particular. The Observatory principally served as a ‘corrective mechanism’ to ensure SNAs’ fiscal commitments (European Commission, 2013). According to the provisions of the legislation establishing the new financial authority, subnational institutions were compelled to present balanced budgets, and SNAs’ state funding was made conditional on their sound financial condition, which was controlled on a monthly basis. In line with this provision, austerity measures imposed not only stricter budget consolidation rules, including spending limits and budget deficit thresholds, but also stricter prudential rules about indebtedness (Dexia, 2012: 2). In this respect, the creation of the Observatory restricted the SNAs’ room for financial manoeuvring by, for example, impeding their access to short-term loans provided by the banking sector. Τhe existence of a centrally administered control mechanism improved SNAs’ credibility, public reliability and trustworthiness. Overall, the establishment of this framework for financially supervising SNAs constituted a significant new institutional asset that could partly compensate in the long term for the vast losses SNAs suffered in terms of financial resources (Interviews iv, v).

Bringing together what we have discussed so far, the first two fiscal adjustment reform programmes had both a positive and a negative impact on both the financial and non-financial resources available for the implementation of the Kallikrates governance reform. On the one hand, they curtailed the SNAs’ constitutional autonomy while brutally reducing the financial and human resources available to them. On the other hand, they brought on board experts in regional and local governance issues to provide technical assistance, and introduced an institutional supervisory framework (Observatory) which facilitated an increase in the SNAs’ economic efficiency and organisational effectiveness. Ex post, it is clear that the budget cuts and strict monitoring of SNA finances permitted the financial consolidation of the highly indebted subnational bodies (municipalities, in the main), thus increasing their institutional viability and credibility. They brought about substantial operational cost-savings and helped to balance the SNAs’ budgets, which would have been very difficult to achieve otherwise over such a short period of time (Oikonomou and Tryposkoufis, 2019; Tsekos and Hlepas, 2019: 63).

This ‘mixed resource effect’ and the positive and negative unintended consequences that stem from it were conditioned by the economic and public policy-making cycles. At the initial agenda-setting policy stage of the Kallikrates reform in the pre-crisis era, the EU framed domestic beliefs and expectations in support of an enhanced role for local and regional authorities in domestic governance, promoting the concept of multi-level governance. This stage evolved during an expansion and growth phase in the Greek economic cycle prior to 2009. However, Kallikrates’ implementation stage evolved in a period of steep economic contraction and recession which owed much to the broader fiscal consolidation effort to address the financial turmoil. In fact, the fiscal adjustment overhaul forcefully imposed by the EU triggered an abrupt turn in the economic cycle. The two first fiscal reform programmes, in 2010 and 2012, had major implications for Kallikrates; the third one, in 2015, much less so. The main reason for this was that while the first two coincided with the early implementation stage of Kallikrates, the third programme coincided with the reform’s late implementation phase. The fact that the worst of the crisis was over, and that some indications of fiscal stabilisation were evident during the implementation of the third programme, also reduced the effect of the third adjustment programme on what had survived of Kallikrates. Since Kallikrates had already produced substantial – internal as well as external – economies of scale, thus contributing significantly to the general budget fiscal consolidation effort, adjustment pressures on SNAs after 2015 were sharply reduced. In other words, the fiscal reform caused major readjustments and distorted the content of Kallikrates, but did not annul it (Tsekos and Hlepas, 2019: 53). Kallikrates’ survival owes much to the advanced policy-making stage it had reached by 2015, which absorbed almost all pressure for its further downgrading. Overall, the Greek decentralisation policy underlines the considerable extent to which any national institutional recalibration effort is dependent on the unintended consequences of other EU-induced reforms implemented in parallel (Papadimitriou and Zartaloudis, 2020: 135).

Perhaps the most significant negative unintended effect on Kallikrates can be seen in relation to its political conceptualisation. The intertwining of the two reforms allowed the central government to play the ‘blame-game’ (Interview ii). Unable to effectively cope with mounting fiscal difficulties, the central authorities shifted the burden of delivering services and goods onto actors under their direct supervision (SNAs), while abandoning them financially (Hlepas, 2020: 256). The SNAs therefore served as lightning rods or better as safety valves for absorbing local and electoral pressures as well as public discontent. By failing to deliver on the declared objectives of Kallikrates, due to the lack of resources available, the SNAs lost part of their output legitimacy and Kallikrates was deprived of a large part of its transformational potential. According to two former Heads of Greek territorial regions: ‘[T]he Greek regions are giants with feet of clay, and only the regional operational programmes of the National and Strategic Reference Framework 2007–2013 keep them afloat’ and ‘. . . unless Regions administer EU co-funded projects through the National and Strategic Reference Framework 2007–2013, they cannot exist’ (Interview i). These statements imply that the scarcity of financial and human resources existed prior to the implementation of the two adjustment programmes, but was severely aggravated by the austerity measures. Hence, what began as a far-reaching and ambitious governance reform evolved into a mechanism for shifting the blame, at least from the SNAs’ viewpoint. ² In Table 2, we summarise the core dimensions and features of the two reform processes in Greece, taking into consideration the positive consequences (cross-synergies) produced, as well as the unintended consequences and adverse effects that impacted on the ‘target reform’ (Kallikrates).

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Table 2.

When reforms feed into other reforms: fiscal consolidation and governance reform.

Dimensions	Fiscal consolidation	Kallikrates governance reform
Main reform catalyst	EU-induced	Framed by the EU, domestically driven
Temporality	Initiated and implemented during the fiscal crisis	Initiated before and implemented during the fiscal crisis
Rationale	Centralising fiscal governance for better performance, cost- minimisation, fiscal sustainability	Decentralising governance, economies of scale, increasing administrative capacity, sparking multi-level governance
Operationalisation	Fiscal cutbacks, layoffs, organisational downsizing, strict financial supervision of SNAs, balanced budgets	Amalgamations, transferring responsibilities (and resources) to SNAs, financial support
Conditioning factor	Scarcity of (non-)financial resources	Availability/scarcity of (non-)financial resources
Cross-synergies	Consolidation of SNAs contributes savings of up to 0.7% of annual GDP to state budgets (Ministry of Finance, 2010)	Fiscal consolidation decreases the number of over-indebted local authorities; fiscal sustainability
Adverse spillover effects	-	Burden-shifting to SNAs; economic and operational downsizing of SNAs; violation of SNAs’ constitutional autonomy; decentralisation dynamics reversed; centralisation boosted

Source: Authors’ own elaboration.

EU: European Union; SNAs: subnational authorities; GDP: gross domestic product.

Concluding remarks

In this article, we posit that the unintended consequences of an EU-driven reform depend on the kind of resources they impact upon and on the domestic economic and public policy-making cycles. We have proposed a heuristic mechanism which distinguishes between the financial and non-financial resources available domestically. The economic and public policy-making cycles, which serve as mediating factors, will condition the scope and size of the unintended effects in accordance with the kind of resources available. Unintended – though, in some cases, highly anticipated – consequences can take the form of negative or positive effects which are contingent upon the existence or scarcity of financial and/or non-financial resources, though there is no predefined or straightforward ‘linear’ relationship between the two. We applied our framework to analyse the interplay between two reforms which were implemented in parallel in Greece: the fiscal consolidation reforms resulting from three consecutive adjustment programmes (2010, 2012 and 2015), and the Kallikrates governance reform (2010). We illustrated how the EU reform actorness in the first reform (‘source-reform’) had a mixed (positive and negative) impact on the second reform (‘target-reform’). On the one hand, it increased efficiency and improved financial management, thus improving non-financial resources as a by-product of the fiscal consolidation process, whereas it reduced the availability of financial resources and constitutionally provisioned autonomy, curtailing its implementation potential. The recession and profound economic contraction, after 2010, impacted substantially on the content of Kallikrates, which was still at an early implementation stage. By the time of the third adjustment programme, in 2015, Kallikrates had reached a point of implementation maturity which explains why it was not cut back still further. However, by that time, the legitimacy of the Kallikrates reform had been already compromised to a large extent. In this respect, Kallikrates evolved into a means of absorbing domestic political pressures and contributing to the rapid fiscal adjustment of the Greek state, rather than unleashing the multi-level governance potential it was initially designed to provide.

We believe that our – heuristic – conceptual approach and our findings on the intertwining of different EU-induced reforms are fully generalisable. The emphasis on resources as the mechanism for studying the unintended effect of one policy on another enables the study of multiple concurring reforms and the analysis of reform interlinkages between different political settings, at the national, European and international level.

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