Former Wales captain Sam Warburton suggested the WRU need to axe one of the four Welsh regions in a bid to help solve the rugby crisis in the country.
It comes amid an ongoing debate over how Ospreys, Scarlets, Cardiff and Dragons should operate in the future.
But Davies believes the regions better-placed to challenge in Europe should be allocated greater finances by the WRU as opposed to funds automatically being split evenly between the four sides.
“Four Welsh regions aren’t going to be competing for the top side in Europe,” explained Davies.
“I think there should be some judgments made as to who is a serious contender to do well in Europe, and the payment should be graduated.
“Now, if the union decide to go with four (regions), I think they’ve got to seriously consider what that distribution is, because to just divide up by four I think is just spreading things through too thinly across the board.”
Warburton hinted that Dragons would be the side to “suffer” should the WRU opt to axe one of the four regions.
But the Gwent region’s co-owner David Buttress feels the WRU need to increase investment into Welsh rugby rather than “shrinking the game”.
“I think for 10 years Welsh rugby has been embarrassingly underinvested in,” he told BBC Radio Wales Breakfast.
“In the last 10 years, we’ve built a hotel and a roof walk and Ireland have been building world-class rugby academies, and we’re seeing the consequence of it.
“We talk about solutions like cutting teams when other nations are talking about investing in their professional game.
“I understand where people are coming from, but unless we start thinking a little bit more of how we grow the game rather than shrinking the game, Welsh rugby is going to condemn itself for a long-term decline. It needs a turnaround now.”
BBC News
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