Tuesday

17th Jan 2017

Focus

Regions feel the pinch

  • In Portugal and Greece, the reduction of the number of municipalities is part of the deal with the troika. (Photo: Paolo Margari)

Looking to save a buck in every corner of the budget, EU countries are now pointing their arrows at subnational governments, a new study has found.

The study, carried out by Dexia Credit Local and presented in September this year, shows that after two years of pumping money into regions, central governments are now tightening their belts.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

  • In 2011, the amount of grants and subsidies to subnational governments fell by 6.6 percent. (Photo: Jorge Franganillo)

In 2011, the amount of grants and subsidies to federated states, regions, provinces, and municipalities fell by 4.9 percent, according to the study, following a 0.6 percent drop in 2010.

Other sources of income include local taxes and user charges - the fees people pay to make use of services like parking and public transport.

As a result, subnational governments, too, are cutting down on spending.

In 2011, the study says, local direct investment fell by 6.6 percent, following a 7 percent drop in 2010. Today's level is back at where it was in 2006.

Public direct investment is money that goes into things like schools, hospitals or waste management, two thirds of which comes from subnational governments, according to the study, commissioned by the Council of European Municipalities and Regions.

"The subnational public sector [is] an engine for public investment," it says. In bigger countries like France, Germany or Italy, it accounts for almost three quarters of public direct investment.

The two-year drop is a first after a decade of "robust" growth, the study says.

Subnational governments have only been able to balance the books by cutting down on staff costs - the first time in a decade - and because in some countries, the economy has begun to pick up. Local tax revenues rose by 5.5 percent, after a slump in recent years.

"It is a stability in disguise," said Isabelle Chatrie, author of the study.

Meanwhile, central governments are hoping to cut costs even further by reducing the number of municipalities and telling them to cooperate more. It is a trend of the past few decades but gained in speed over the last couple of years.

"Municipal mergers have picked up with the crisis and austerity plans," she says.

In Greece and Portugal, who both agreed to reforms in return of a bail-out, reducing the number of subnational governments is even part of the deal with the so-called troika of international lenders - the International Monetary Fund, the European Central Bank, and the European Commission.

Greece, who in 1997 had already gone from 5,825 to 1,034 municipalities, went to 325 in 2010. Portugal boasted 278 municipalities in 2011. In May of the same year it agreed to reduce "the number of municipal offices by at least 20% per year in 2012 and 2013."

Overall, the number of municipalities in the EU, according to Dexia, dropped from 92,735 in 2004 to 89,149 in 2011.

For their part, subnational governments themselves are not celebrating the relative decline of their own species.

"The troika thinks that budget control is better on the central level, but they are wrong," Frédéric Vallier, secretary general of the Council of European Municipalities and Regions, told EUobserver.

"For us, it is about responsibility. Everything that gives us more responsibility is good," he added.

Focus

Dieselgate casts doubt over low emission zones

Many European cities use low emission zones, and some are considering to ban dirty cars. But there are limits to how well the EU standards can be used to determine which cars are clean.

Stakeholders' Highlights

  1. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  2. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  3. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  4. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  5. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  6. European Free AllianceMinority Rights and Autonomy are a European Normality
  7. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  8. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  9. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  10. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  11. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey
  12. Zero Waste EuropePublic Support Needed to Promote Zero Waste in More Municipalities