L'Aquila Earthquake and the EU Solidarity Fund: A Case Study

L'Aquila Earthquake and the EU Solidarity Fund: A Case Study Sara Talpo Urban Resilience Lab Konstanz, 2015 Working Paper SoSe 2015/1 1

Table of contents I. Introduction...3 II. The Case Study and its Policy Framework...5 a. L'Aquila Earthquake and the reconstruction strategy...5 b. The EU Solidarity Fund...7 III. The Action Arena...8 IV. Research Focus...9 V. Analysis and Main Findings...11 VI. Conclusion and further recommendations...13 VII. Appendix...16 VIII. References...17 2

I. Introduction People enjoy Common Pool Resources of many sorts repeatedly on a daily basis. They do so when lightening their houses, when eating their meal or simply while breathing. Common Pool Resources (CPR) -and their associated problems- have long been studied by scholars and maybe the most famous definition of the concept of CPR is the one given by Nobel Prize winner Elionor Ostrom in "Governing the Commons, the Evolution of Institutions for Collective Actions". Common Pool Resources are there defined as a "natural or man-made resource system that is sufficiently large as to make it costly (but not impossible) to exclude potential beneficiaries from obtaining benefits from its use" (Ostrom, 1990, p. 30). Typical example of a CPR is that of the fisheries: this natural resource is renewable -if properly managed- and subject to both excludability and subtractability problems, meaning that the cost of excluding people from its use makes it practically not convenient to do so and that, once the resource has been used by some, there would be less left for the others. These characteristics of Common Pool Resources differentiate them from the so called "public goods", which, although at times still subject to excludability problems, generally do not diminish in their quantity once used -like the example of a street light suggests. Given the importance of Common Pool Resources in everyday life, scholars have tried to identify the main problems connected to their special nature, such as rivalry, congestion and degradation (Foster, 2011). Maybe the most famous account of the problems associated with CPR is Garrett Hardin's Tragedy of the Commons tale (Hardin 1968). In this paper I argue that money, although generally thought as some private property, fall in the category of CPR too. With reference to the definition of CPR given by Ostrom 2007, money is both subject to excludability and subtractability problems, and, as a man-made resource, it needs to be sustained. Like all CPR resources, therefore, money needs to be carefully managed due to its peculiar characteristics. This is true also in light of the fundamental role money plays in our 3

society, where almost everything is bought, sold or financed through this particular CPR. This applies of course also when considering the financing of urban projects, like the planning and construction of roads, dams or subways, in which huge sums of money given by governments or other kinds of institutions need to be properly allocated and managed to guarantee that the resource is not wasted and, on the contrary, it is used for the intended purpose. The idea for this paper stems from the recovery effort of L'Aquila city after the earthquake that struck the region in 2009. The term recovery can be found in the literature with slightly different definitions in different disciplines. Klein defines it as "the ability of a system that has undergone stress to recover and return to its original state" (Klein, 2003). In particular, urban resilience can be defined as the ability -usually of a city- to recover from a shock as quickly and as effectively as possible. In considering the recovery plan for L'Aquila, this paper focuses its attention on the actual use of the money received through the European Union Solidarity Fund (EUSF), intended to help Member States coping with emergency situations which require an immediate action. In the following contribution a diagnostic analysis of the process that led to the construction of permanent houses for citizens left without a home in the area of L'Aquila -the so called C.A.S.E. project- is undertaken. I therefore start from the outcome (how our CPR was actually spent) and analyse the process that led to it. As Ostrom argues, by doing so, "we are ascertaining the nature or cause of something, usually an unwanted situation" (Ostrom 2010), which in this case is the inappropriate use of the money received through the EUSF. The analysis is performed at the operational level, as defined in Ostrom 2011, since the "actors interact in light of the incentives they face to generate outcomes directly in the world". Given the characteristics of the case study, the Institutional Analysis and Development Framework (IAD), as developed by Ostrom 2007, is used as a roadmap throughout the analysis. Following the IAD Framework, we want to analyse the causal relationship between how the EUSF money was actually spent by Italian authorities and 4

information rules, as defined by Ostrom 2005. Before that, a brief account of the background of the case study is given. II. The Case Study and its Policy Framework a. L'Aquila Earthquake and the reconstruction strategy On April 6, 2009 one of the strongest earthquake in the history of Italy struck the region of Abruzzi. The city of L'Aquila and its province were particularly struck by the event, although the area hit included also most of the Abruzzi Region and some neighbouring areas. The 6,3- magnitude earthquake caused "severe damage to basic infrastructure and brought serious harm to the population" (ECA Special Report, 2012). In fact, according to a report of the European Commission, "out of a population of approximately 300 000 affected by the disaster, 300 casualties were reported and 1 500 injured. Thousands lost their houses and/or private business, and around 30 000 people were placed in tent camps for long periods. Another 32 000 were placed in hotels and private houses on the Adriatic coast and some 20 000 were reported to have moved to private accommodations outside the region. A significant portion of the buildings surveyed after the earthquake were found to be entirely unsafe" (European Commission Report, 2011). These figures surely give a sense of the impact of the event on the region, in particular regarding the dramatic situation of the almost 80 000 persons left without a house. Right after the earthquake, in the afternoon of April 6, the Italian government, according to Law 225/92, declared the state of emergency 1, thus putting the Department of the Italian Civil Protection in charge of realising and coordinating the recovery effort. For the first time in Italy the 1 A state of emergency may be declared 'imminent' and not just at the occurrence of natural disasters, or relating to action of man that by intensity and extension must be tackled with immediate intervention with extraordinary powers and means (Protezione Civile, 2015) 5

Civil Protection was also responsible for the reconstruction strategy (Dossier Abruzzo, 2010). Moreover, with the intend of starting the recovery process, Italian authorities successfully applied to obtain the financial assistance of the European Union through the EU Solidarity Fund within the 10 week deadline set for the application to the Fund. The reconstruction strategy after the earthquake envisaged three main construction programmes: (I) the MUSP project, for the construction of "temporary buildings substituting the schools that have been damaged of destructed by the earthquake" (Protezione Civile, 2010); (II) the MAP project, for the construction of "temporary houses that will host more than 6 000 people" in area different than L'Aquila; (III) the C.A.S.E. project, which aimed at "building 4 500 new apartments, organised in 183 buildings, in order to host 18 000 people having lost their own flats" (Protezione Civile, 2010). In the description of this last project the Civil Protection specifies that: "although being called temporary, the qualitative features of the houses are as high as the ones of permanent buildings" (Protezione Civile, 2010), thus actually using up to the 70% (ca. 350 million euro) of EUSF money for what can be defined real reconstruction (ECA Special Report, 2012). b. The EU Solidarity Fund The EU Solidarity Fund was set up under Regulation 2012/2002 of 11 November 2002, as a response to some disastrous flooding that hit Europe in 2002. In particular, to get access to the fund, the event occurred in one State needs to be classified as a major natural disaster. Regulation 2012/2002 describes the concept of 'major disaster' by stating that "it should mean any disaster [...] resulting in important damage expressed in financial terms or as a percentage of the gross national income (GNI)". L'Aquila earthquake was deemed to fall within this category since the damage estimated by Italian authorities amounted to more than 10 billion euro -which corresponds to 0.67% of Italy's GNI- exceeding three times the normal threshold (3 billion euro) 6

for mobilising the fund (European Commission, 2009). However, one needs to consider that only some kinds of operations are eligible under Regulation 2012/2002. As specified in the ECA Special Report, "the aim of the EUSF is to help Member States and the countries in the process of negotiating their accession to the European Union to respond to major natural disasters by complementing their public expenditure on essential emergency operations" (ECA Special Report, 2012). The Fund is in fact conceived as a relief measure to help State coping with urgent situations in the aftermath of a disaster. For this reason not all operations can be financed through this instrument. According to the Regulation, essential emergency situations that can be financed through the EUSF include: (I) immediate restoration to working order of infrastructure and plant in the fields of energy, water and waste water, telecommunications, transport, health and education; (II) providing temporary accommodation and funding rescue services to meet the immediate needs of the population concerned; (III) immediate securing of preventive infrastructures and measures of immediate protection of the cultural heritage; (IV) immediate cleaning up of disasterstricken areas, including natural zones (Regulation 2012/2002). Real reconstruction, i.e. the building of permanent houses, therefore seems not to be included in the list of eligible operations. On 11 November 2009 the European Parliament adopted the Commission's EUSF proposal for L'Aquila earthquake and the Implementation Agreement between the European Commission and the Italian authorities was signed, with the grant (494 million euro) to be paid on the 30th of November 2009. According to ECA Special Report 2012, in the Implementation Agreement the operations to be financed included (I) initial emergency operations; (II) the MUSP project; (III) the MAP project and (IV) the C.A.S.E. projects, "consisting of temporary houses" (ECA Special Report, 2012). 7

III. The Action Arena Now that we have defined the background of the case study, I move on by defining our unit of analysis, i.e. our action arena, which is the focal point of the IAD Framework since it enables us to analyse, predict and explain behaviour within institutional arrangements (Ostrom 2014). Ostrom defines an action arena as "a social space where individuals interact, exchange goods and services, solve problems, dominate one another, or fight" (Ostrom, 2014). Each action arena is made up of two elements: (I) an action situation, defined as the "analytical concept that enables an analyst to isolate the immediate structure affecting the process of interest [...] for the purpose of explaining regularities in human actions and results" (Ostrom, 2011). In this case, the action situation is the way Italian authorities spent the money, i.e. the construction of permanent houses; (II) a set of variables called actor. The actor in a situation "can be thought of as a single individual or as a group functioning as a corporate actor (Ostrom, 2011). In our case the main actors identified are three: 1. The Italian Government, which after the earthquake declared the state of emergency and put the Department of Civil Protection in charge of the reconstruction programmes 2. The Department of the Civil Protection, which is a complex body with the duty of coordinating the response to natural disasters which require extraordinary means. After the state of emergency was declared it was in charge of the reconstruction projects 3. The European Union, -and in particular the European Commission and the monitoring bodies- which needs to assess the eligibility of Italy in order to receive the funds and monitor whether the money was used in compliance with the EUSF Regulation Following the approach of previous researches adopting the IAD Framework, some assumptions have to be made about actors' behaviour. In fact, many situations analysed through the IAD 8

Framework are characterised by uncertainty and complexity, for example as far as the amount of information available to the actors is concerned. How do actors cope with these shortcomings? Extreme assumptions like full maximisation of benefit or full rationality, typical of the homo ecomonicus, are not appropriate to describe the behaviour of actors in such uncertain and complex situations. Therefore, in this paper, as in the IAD literature, actors are assumed to be constrained when making their choices, and in particular are said to be bounded rational, meaning that "persons are intendedly rational but only limitedly so" (Ostrom, 2014). Thus, since information is costly and the information-processing capabilities of human beings are limited, "individuals must often make choices based on incomplete knowledge of all possible alternatives and their likely outcomes" (Ostrom, 2014). IV. Research Focus Once I have specified our action arena and the main actors involved, I need to define the causal relationship I want to analyse. The research question this paper aims at analysing is: "Can information rules explain why the Italian Civil Protection thought they could get away with the defection, for example by not submitting reports?". In particular, my research focus is on who was in charge of monitoring and how often they were supposed to monitor the use of the money of the EUSF in the recovery effort of L'Aquila. In order to conduct my research, I need to operationalise the variables I am going to use to uncover the causal relationship. I define my dependent variable as "how the Italian Civil Protection spent the money". This means I consider the actual spending undertaken by the Civil Protection, i.e. the construction of the permanent houses of the C.A.S.E. project. In order to measure it, I performed a web search using Google Deutschland as a browser, selecting documents from 9

different sources. To this end I selected the relevant sources by using key words that could help me define my dependent variable. The list of key words is listed in the Appendix. My search led me to identify several official documents coming from the website of the Civil Protection, the Italian Government and the European Union that were relevant for my research. I also used Italian news paper articles dealing with the reconstruction process of L'Aquila (a list of the most relevant documents is reported in the Appendix). After having collected the documents, I performed a content analysis by using search words to help me identify the critical information in the text. The coding scheme I used can also be found in the appendix. As far as my independent variable is concerned, I define it as information rules. As Ostrom argues, "an important part of any action situation is the information available to participants about the overall structure of that situation, the current state of individual state variables, the previous and current moves of the other participants in positions, and their own past moves. Information rules affect the level of information available to participants. Information rules authorise channels of information flows among participants, assign the obligation, permission or prohibition to communicate to participants in positions at particular decision nodes, and the language and form in which communication will take place" (Ostrom, 2005). Given this definition, I think it is clear why information rules can be a fundamental variable in explaining the way the Italian Civil Protection decided to use the money. In my case study I consider them to be operational rules, as defined in Ostrom 2014, since they directly affect the day-to-day decisions made by the actors, in particular by the Italian Civil Protection. It was, however, actually difficult to classify them either as rules in form or as rules in use. In making this distinction, Ostrom argues that rules in form may be written down but may still be unknown to the actors, thus not having a real effect. Rule in use, on the contrary, are shared concepts among the actors and are relevant to the functioning of the system (Wall, 2014). In this particular case, however, I think that rules in form should be consistent 10

with rules in use. In fact, information rules laid down in Regulation 2012/2002 are in written form and theoretically might be not known by some participants. However, both the European Commission and the Department of the Civil Protection have signed an Implementation Agreement, which leads us to presume that they both had knowledge of the conditions of the grant. Therefore, in this case I will consider information rules to be rules in use in the sense that they could not be ignored by the parties and they were agreed upon when signing the Implementation Agreement. In order to be able to measure such rules, I used the same strategy as with my dependent variable. I performed a web search with Google Deutschland using some key words (see Appendix) to select my sources, and then I performed a content analysis of the relevant documents in order to find the relevant information for my research -the coding scheme is reported in the appendix. I mainly used EU official documents from the European Commission, the Committee on Budgetary Control and the European Court of Auditors, but also EU Regulations (see Appendix). V. Analysis and Main Findings As I have previously said, in my paper I argue that information rules can explain why the Italian Civil Protection though they can get away with their defection, i.e. they can use the money of the EUSF to build permanent houses, contrary to what is envisaged by the EU Regulation 2012/2002. In order to understand if it is the case, I focused my attention on the wording of EU Regulation 2012/2002 establishing the EU Solidarity Fund, searching for rules regarding the monitoring process performed by EU bodies to ensure compliance. Ostrom defines rules as "shared understandings among those involved that refer to enforced prescriptions about which actions (or state of the world) are required, prohibited, or permitted. All rules are the result of implicit or explicit efforts to achieve order and predictability among humans by creating class of persons (positions) that are then required, permitted, or forbidden to take classes of actions in relation to 11

required, permitted, or forbidden states of the world" (Ostrom, 2011). For the purpose of my case study, however, an even better definition for the provisions laid down in Regulation 2012/2002 is that of institutional statements which "describe opportunities and constraints that create expectations about other actors' behaviour" (Ostrom, 2005) The reason why it is preferable to call them institutional statements rather than rules is that, as we know from Ostrom 2007, such arrangements are not all the same, in particular as far as their strength and effectiveness are concerned. Recognising these differences, Ostrom 2007 organises them in rules, norms and strategies: (I) Rules are defined as "shared prescriptions (must, must not, or may) that are mutually understood and predictably enforced in particular situations by agents responsible for monitoring conduct and for imposing sanctions"; (II) Norms instead are "shared prescriptions that tend to be enforced by the participants themselves through internally and externally imposed costs and inducements"; (III) Lastly, strategies are "regularised plans that individuals make within the structure of incentives produced by rules, norms and expectations of the likely behaviour of others in a situation affected by relevant physical and material conditions" (Ostrom, 2007). From these definitions it seems clear that rules stand out as the most binding and arguably clear-cut shared concept, giving precise indications about what actors must, must not or may do. In particular, rules, norm and strategies differentiate deeply as far as their syntax is concerned. While rules and norms can be analysed using the ADICO and ADIC syntax respectively (for explanation, see Crawford & Ostrom, 2005), strategies contain only three components, namely, (I) an attribute, (II) an aim and (III) a condition, but the not deontic or 'or else' component. For this reason, at the beginning of my research I was expecting to find in the text of the EU Regulation 2012/2002 all the elements characterising a rule, with particular emphasis given to the deontic component -which set the obligations, permissions or prohibitions through the use of must, may, must not- and the 'or else' component -which specifies the consequences for not following a rule. However, no word 12

such as 'must' or 'may' is found in it with regard to the monitoring process. This appears clear in article 11, the one dealing with the monitoring procedure, according to which: "The financial decisions and all agreements and contracts resulting therefrom shall provide for checks by the Commission, through the Anti-Fraud Office (OLAF), and for on-the-spot checks to be carried out by the Commission and the Court of Auditors, in accordance with the appropriate procedures" (Art 11, Regulation 2012/2002). The use of 'shall' is actually predominant in the whole text of the regulation and it makes clear that the approach adopted when drafting it was more that of a soft strategy, rather than a rule or norm. Moreover, no indication of a future sanction in the case of non compliance is specified. This, of course, strongly diminishes the burden of the provisions laid down in the Regulation on the actors in the action situation, since, considering the plain meaning of words, no real obligation is set. Finally, by analysing the whole text, a surprisingly lack of clarity can be found both as for the timings and actual procedure of the monitoring process, and as for the definition of temporary buildings. In fact, no thorough explanation is given about what is meant by 'temporary', allowing for different -possibly contrasting- interpretations. All these should be of great concern for both the EU and its citizens, since such vagueness in information rules is likely to lead to defectionist behaviours and misinterpretations, resulting in the misuse of one of the most important CPR in our society, i.e. money. VI. Conclusion and further recommendations The findings of this paper highlight the importance of clear and mutually-shared information rules in institutional contexts to guarantee a proper use of CPR like money. As the L'Aquila case study 13

shows, it is not sufficient for arrangements to be written down to assure compliance. They need also to give precise instructions as what one must and must not do, specify possible future sanctions, and be clearly formulated in their content. For these reasons it appears clear the need for the European Union to better specify its Regulation concerning the EU Solidarity Fund, with particular attention given to those articles dealing with the monitoring procedures. To this end, as we have seen, the use of 'rule' terminology -must, must not, may- would be preferable to that of softer terms like 'shall' and details on who -and how often- is going to monitor the use of the fund should be better specified or, in some cases, added. A section regarding sanctions in case of non compliance should also be added, since it can contribute to the credibility of the provisions. Finally, a definition of 'temporary houses' needs to be included, so that all actors share a mutual understanding of the concept and misinterpretations are ruled out. Of course this paper has many limitations in its analysis and I am well aware of it. The most significant limitation is that many official documents relevant to the case study were not accessible. Examples of these are the Implementation Agreement signed by the European Commission and the Italian authorities in November 2009 and the Commission's internal Audit Report -transmitted to CONT (Committee on Budgetary Control) in 2013- which is classified as confidential, and thus not public. Moreover, it is hard to tell if the Commission had actually knowledge of the construction of permanent buildings by Italian authorities during the reconstruction phase and acted negligently by not taking any corrective action, or simply ignored the situation, since contrasting information and interpretations can be found on the matter (Committee on Budgetary Control, 2013). Given these limitations, recommendations for further research are therefore many. They include for instance trying to get access to some official documents which are not accessible through the 14

internet. Another suggestion is that of verifying the previous -if any- interactions between the Italian Civil Protection and the European Commission when dealing with grants for emergency situations in the past. In fact, it could be interesting to see if the Italian Civil Protection had some previous knowledge that the monitoring procedures of the European Union are indeed not well specified and thus they may leave ground to defections and see if this has played a role in their decision to build permanent houses by fostering opportunistic behaviours -i.e. saying one thing and doing something else (Ostrom, 2011). Finally, another analysis of this same case study could be performed using payoff rules as independent variable. According to Ostrom, payoff rules, in fact, assign external reward or sanctions for particular actions or outcomes, thus establishing incentives and deterrents for action (Ostrom, 2011). Given this definition, payoff rules therefore could also play a role in explaining our dependent variable. 15

Appendix Dependent variable - Web search: Keywords C.A.S.E. Project L'Aquila Earthquake Italian Civil Protection Permanent buildings Reconstruction strategy - Selected Documents Protezione Civile, From Resilient Recovery to Sustainable Development: L'Aquila Earthquake of 2009 Italian Republic, Law 225/92 Istituzione del Servizio Nazionale della Protezione Civile. Available at: http://www.protezionecivile.fvg.it/protciv/getdoc.aspx/7.pdf Committee of Budgetary Control, Working Document on Special Report No 24/2012 Dossier Abruzzo, La fine dell'isola felice. News paper article from 'Libera. Associazioni, nomi e numeri contro le mafie' - Content Analysis: Coding Scheme permanent houses, C.A.S.E. project, real reconstruction Independent Variable - Web search: Keywords EUSF Regulation Rules Monitoring body 16

Eligibility Compliance CONT (Committee on Budgetary Control) - Selected Documents Council Regulation (EC) No 2012/2002 of 11 November 2002 establishing the European Union Solidarity Fund European Court of Auditors, Special Report No 24, 2012 Committee of Budgetary Control, Working Document on Special Report No 24/2012 - Content Analysis: Coding Scheme monitoring, checks, control, compliance 17

References Committee on Budgetary Control, 2013: Working Document on Special Report No 24/2012 - The European Solidarity Fund's response to the 2009 Abruzzi earthquake: The relevance and cost of the operation. Rapporteur: Søren Bo Søndergaard Dossier Abruzzo, 2012: La fine dell'isola felice. Libera. Associazioni, nomi e numeri contro le mafie. December 2010 European Commission, 2009: Preliminary Draft Amending Budget N.9 to the General Budget 2009, Statement of expenditure by Section European Commission, 2011: Report from the Commission: European Union Solidarity Fund- Annual Report 2009, March 2011 European Court of Auditors, 2012: The European Union Solidarity Fund's Response to the 2009 Abruzzi Earthquake: The Relevance and Cost of Operations, Special Report No 24, 2012 Foster Sheila R, 2011: "Collective Action and the Urban Commons". The Fordham Law Archive of Scholarship and History, Fordham Law School Klein R, Nicholls R, Thomalla F, 2003. Resilience to natural hazards: How useful is this concept? Environmental Hazards, 5, pp. 35-45 Ostom E, 1990: "Governing the Commons: The Evolution of Institutions for Collective Action", Cambridge University Press 1990 Ostrom E, 2011: Background on the Institutional Analysis and Development Framework. The Policy Studies Journal, Vol. 39, N. 1, 2011 Ostrom E, Cox M, Schlager E, 2014: An Assessment of the Institutional Analysis and Development Framework and Introduction of the Social-Ecological System Framework. In: PA Sabatier and CM Weible ed. Theories of the Policy Process, 267-306. 3rd ed. Boulder, CO: Westview Press Ostrom E, Crawford S, 2005: Classifying Rules. In: Ostrom E, Understanding Institutional Diversity. Princeton University Press, Princeton Oxford 2005, Ch. 7, pp. 186-215 18

Ostrom E, 2007: Institutional Rational Choice: An Assessment of the Institutional Analysis and Development Framework. In: PA Sabatier ed. Theories of the Policy Process, Westview Press, Ch.2 pp.21-64 Ostrom E, Cox Michael, 2010: Moving Beyond Panaceas: a Multi-tiered diagnostic Approach for Social-ecological Analysis. Foundation for Environmental Conservation, 2010 Protezione Civile, 2010: From Resilient Recovery to Sustainable Development: L'Aquila Earthquake of 2009. Presented at the International Recovery Forum, Kobe, Japan January 2010 Protezione Civile, 2015: States of Emergency. Protezione Civile web site, available at: http://www.protezionecivile.gov.it/jcms/en/stati_di_emergenza.wp Wall D, 2014: The Sustainable Economics of Elionor Ostrom: Commons, Contestation and craft. Published by Routledge, 2014 19