The EU has launched an investigation into how more than half a million euros earmarked for regional development in Italy were instead spent on putting on an Elton John concert.

Brussels was alerted by Mario Borghezio, a European MP with Italy's Northern League party, after it was discovered that funds for culture subsidies – used to support the traditional music, crafts and cuisines of member states – had been paid to the British pop singer. Borghezio said €750,000 (£640,000) had been spent on the concert, a sum he described as "shameful".

The union had handed the money to the regional authority of Campania, which includes Naples. "We know EU funds were used for this concert, and we are looking into it to see if it was eligible," an EU spokesman said. "This type of funding is for regional development. Cultural projects can be included, but with rules. If we find out that funds were used improperly we would ask Italy to deduct them from the next request for funds they make."

A former Campania official involved in the concert said the use of EU funds was "absolutely legitimate" and claimed the region had paid out "only" €600,000 (£500,000). "That got us TV and CD rights too," Dario Scalabrini, an ex-head of the region's tourism office, said. "I don't understand the problem. The EU has already approved the project. This money was given for the marketing of the city, and that is what we did. Just consider the number of people who stayed in Naples because of the concert."

Scalabrini said the lack of Neapolitan influences in Elton's repertoire was not an issue. "Neapolitan culture cannot be a closed off phenomenon – and besides, Elton John sang the Neapolitan song O Sole Mio for the first time ever," he added. "The audience was crying with emotion."

Regional officials had later tried to book Paul McCartney to perform, Scalabrini said, but the plan was abandoned when the centre-left governor was voted out of office in regional elections this year. "We would have used EU funds to pay McCartney too," he added. "It would have been a great concert."

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