This is certainly an important question. At the same time, money alone does not make the world go round! There has been so much government spending in so many countries that has not led to much in the way of economic development or economic growth. While access to financial resources can be critical, it is also true that the more important question is what should the government spending be focused on. We have too many cases of where access to financial resources is what people think will make the difference, when in point of fact there are many other factors such as local and regional cultures that are or are not conducive to entrepreneurial development or how $$$ could be spent to improve capacities of entrepreneurs and business managers, or to improve business planning or to better understand market access.; and there are many other factors too.

Chris Bryant 

It depends on the extent to which the central bank purchases regional bonds, if the central government provides necessary fiscal transfers, and the extent to which the country, as a whole, has monetary sovereignty.

One another crucial variable is intergovernmental grants. In Greece the system of local goverment financialization is centric and therefore turbulences in central government, affects negatively regional development.

We must not forget that one of the most important challenges is represented by strong and often increasing regional disparities in growth and development. Many governments have spent a great deal on trying to reduce such disparities and occasionally there has been some success, such as the situation in France in the 1960s to 1980s.

However, we keep seeing in country after country the disparities either being maintained or even increasing. I think that one of the main reasons has to do with the indirect and unforeseen consequences of government spending in major urban and metropolitan centers.  One can understand quite easily why governments spend large sums of money in these urban settings ... there are always difficulties to be resolved such as inadequate infrastructure (e.g. highway infrastructure in many large Western cities and metropolitan centers) or helping alleviate poverty (very understandable), but some of this spending simply makes such large urban centers even more attractive leading to increased migration from regions undergoing economic difficulties towards these larger cities and metropolitan centers. It's like a vicious circle and government just does not seem to understand this, and the difference between resolving short term problems and at the same time reinforcing larger scale (in terms of geographic consequences on regional growth and development) problems.

Chris Bryant