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The creation of a single market and the adoption of a common currency significantly changed the framework of regional development policy implementation in the European Union. Besides losing some powers to higher levels of a stronger "European Administration", national governments are bound to further decentralise, for efficiency reasons, to regional and local levels of government. These changes represent an opportunity to increase the relative importance of local and regional development policies but raise budgetary constraint problems. The difficult task of assuring the efficiency of the whole system while promoting equity among regions brings fiscal federalism and its connection with regional development to the front page of Regional Science agenda.
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