This chapter explores the role of strategic interactions that affect the spatial allocation of structural funds in the European Union. More specifically, this chapter seeks to test if the interactions between government decisions are strategic substitutes or complements in the context of the European structural funds allocation. First, we present a theoretical model which depicts how the strategic interactions could affect the allocation of public grants in a bargaining process. Then, we test the direction of strategic interaction on the allocation of structural funds for the 2000–2006 programming period using spatial econometric techniques. We find a negative spatial interaction between European funds allocated to a region and the funds received by its neighborhood. Our results suggest strategic substitutability in the lobbying effort of regions to attract European funds.