The future of Europe – built on strong municipalities

Page 1

This book is a result of the programme “Building Administrative Capacity in the Danube Region and Western Balkans (BACID)”. BACID aimed at strengthening the governance structures in the Western Balkan and the Republic of Moldova with focus on local governments and European integration. It has been supported by the Austrian Development Agency and implemented by the Austrian Association of Cities and Towns (AACT) and the KDZ Centre for Public Administration Research.

In the first chapter we asked municipal practitioners from the European Union to present their experiences with the impact of the European Union on local governments such as:

• Subsidiarity in the European Union

• Financing municipalities including public investments and the fiscal compact

• Public-private partnerships including public procurement

• The EU Urban Agenda and regional policy

• Water sector and trade agreements

• Experiences with programming EU-funds

The second chapter focuses on the European integration activities of the local government associations in the candidate and potential candidate countries of the Western Balkan:

• The role of local government associations (LGA) in the EU negotiation process

• Activities of the LGAs in Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia including the cooperation with CEMR (Council of European Municipalities and Regions)

• EU funds supporting the pre-accession phase

• NALAS position on EU enlargement

• Challenges of fiscal decentralisation in South East Europe

future of Europe –built on strong municipalities Impact of the European Union on local authorities 20
ISBN: 978-3-7083-1198-2 The
The future of Europe –built on strong municipalities 20 Österreichischer Städtebund
Thomas Prorok, Alexandra Schantl und Marija Šošic (Eds.) ´

The future of Europe –built on strong municipalities

PUBLIC MANAGEMENT AND FINANCES edited by KDZ – Centre for Public Administration Research

The future of Europe –built on strong municipalities

Impact of the European Union on local authorities

with contributions of C. Breznik, A. Haxhimali, K. Himpele, N. Ilijeva-Acevska, M. Kauer, G. Kosyak, M. Kremser, I. Lazic, H. Maier-De Kruijff, B. Misovic, I. Nikolov, M. Novello, J. Prantl, O. Prausmüller, T. Prorok, J. Roth, A. Schantl, J. Schmid, I. Serafimova, C. Singer, M. Šošić, V. Starovlah, F. Vallier, M. Vana, A. Vukmirovic, S. Wolesa, K. Zajazi

edited by T. Prorok

A. Schantl

M. Šošić

Wien · Graz 2017

Bibliographic information published by the Deutsche Nationalbibliothek

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at

This publication has been produced with the assistance of the Austrian Development Agency (ADA). The contents of the articles are the sole responsibility of the author/s and can in no way be taken to reflect the views of ADA nor the Austrian Government.

All rights reserved.

ISBN 978-3-7083-1198-2

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Preface: BACID – the first three years of success

This book is a result of the programme “Building Administrative Capacity in the Danube Region and Western Balkans (BACID)”. Its objective is to strengthen the governance structures in the Western Balkan and the Republic of Moldova, with a focus on local governments and European integration. BACID has been supported by the Austrian Development Agency and implemented by the Austrian Association of Cities and Towns (AACT) and the KDZ Centre for Public Administration Research between 2015 and 2017.

BACIDs work is divided into three pillars:

▪ BACID Fund

▪ Danube Governance Hub

▪ LOGON 2020+

1 Pillar 1 – BACID Fund

BACID Fund is a funding facility supporting small actions of exchange of knowledge between Austrian entities and partners in the public administration sector to the non-EU-countries of the Western Balkan and Moldova. The objective is to strengthen their capacities to introduce and implement EU acquis relevant to local and regional governments.

The BACID Fund has implemented around 32 projects covering the topics of e-governance and transparency, local economic development, SMEs and social entrepreneurship, agriculture, district heating and waste management, tourism development, land management, social and health care, fire protection and policy evaluation. For example, the BACID Fund has supported:

▪ Enhancing the security structures in Moldova: a project for the development of cities, regions and civil protection

▪ Connecting Laktasi Tourism to Europe (BiH)

▪ Training on EU funds with local government associations in Montenegro, Albania and Serbia

▪ Nurturing social enterprises in active labour market policies framework for inclusive local growth in Macedonia

▪ Evaluation and financing possibilities of waste management in Serbia

▪ Capacity building for investment projects in the Sarajevo Canton (BiH).

The full list with project descriptions and documents is available on the BACID website: (


Table 1: Projects of the BACID Fund

KDZ, 2017

2 Pillar 2 – Danube Governance Hub

A main result of BACID is the establishment of the Danube Governance Hub. The “Danube Governance Hub (DGH)” supports good governance and public administration reform (PAR) in the Danube region. The vision is to create the foundation for a strong public sector with strong capacity based on European standards for the European Union, its members, candidate and neighbouring countries.

The Danube Governance Hub was initiated during the “Public Governance as the Foundation of European Integration” conference in Vienna in June 2016, which was organised in partnership with the Austrian Ministry for Europe, Integration and Foreign Affairs, the City of Vienna and the Regional Cooperation Council (RCC).

With the core partners ReSPA (Regional School of Public Administration) and the Centre of Expertise for Local Government Reform of the Council of Europe, the Danube Governance Hub focuses on:

Establishment of the Regional Center for Quality in Public Sector

BACID supports ReSPA in its efforts to act as a “Regional Center for Quality in Public Sector” in cooperation with the Danube Governance Hub. Quality management has been recognised as an essential part of public administration reform in the Western Balkan countries. The Regional Center shall support the ReSPA members by establishing and implementing quality management in the public sector. The working priorities of the Center will be the “increasing quality of public service delivery” and a “Common


Preface: BACID – the first three years of success

Assessment Framework (CAF) including all organizational aspects of Quality Management”.

Local governments’ contribution to public administration reform

The Strategy for Innovation and Good Governance at Local Level and the European Label for Governance Excellence are “governance tools” of the Council of Europe. These tools draw the attention to the importance of the local level for successful governance and public administration reforms in the Danube and Western Balkan region. The Council of Europe and ReSPA will focus on the need for better coordination and involvement of the local governments into the activities of public administration reform. The “Regional Center for Quality in the Public Sector” could be a first by also offering support to the local level.

Danube Governance Tool Database

Manifold tools exist to improve the governance of public sector organisations in Europe. This can be recognised as a strong point and obstacle at the same time. On the one hand, it can be seen as an advantage for public sector organisations to have a choice to select between different tools for improving human resources, financial management, strategy development, business environment, quality, etc. On the other hand, the mapping of the tools in use in different countries and institutions is missing, as well as monitoring of their strengths and weaknesses in real use in different environments.

Therefore, BACID has undertaken the first step towards a “Danube Governance Tool Database”. It provides an overview of existing tools from various organisations dealing with the improvement of governance in the public sector. The focus lies on instruments for practical application like assessment tools and forms. The tools are categorised and presented with key words and short descriptions. The database contains links to online toolkits, further guidelines like handbooks, websites with interesting data, surveys or best practices and other instruments.



Table 2: Danube Governance Database – screenshot:

The database is based on a wiki platform that allows all interested persons to add new tools.


Preface: BACID – the first three years of success

Mission statement of the Danube Governance Hub

Furthermore, a mission statement has been agreed. The partners of the Danube Governance Hub believe that sustained governance and public administration reform efforts are the key to economic development, democratic governance and boosting European integration. The Danube Governance Hub pursues the following objectives:

▪ Strengthening European values and instruments of public management

▪ Initiating a forum for exchange on public administration instruments and strategies

▪ Recognising the essential role of local governments

▪ Improving public sector organisations by implementing pilot projects

▪ Encouraging excellent leadership

▪ Opening government for civil society and transparency

▪ Profiting from evidence-based management and policy-making

Excursus: Sustainable mentoring support (SMS)

BACID has implemented nine mentorings in the partner countries as preparation for the Danube Governance Hub. The concept of the mentorings is hands-on supports for professionals dealing with public administration issues. The purpose of the mentoring is to get partner institutions acquainted with the Austrian experiences and elaborate documents or tools (strategy, action plan, methodology, etc.) that will bring improvement in the delivery of public services. Between 2015 and 2017, the following mentorings have been implemented. Further information and elaborated documents are available on the BACID website,

▪ Ministry of Public Administration and Local Self-Government of Serbia: Planning the implementation of CAF in Serbian public administration

▪ City of Banja Luka (Bosnia and Herzegovina, Republika Srpska): Guideline for public-private partnerships

▪ City of Podgorica (Montenegro): Guideline for public-private partnerships

▪ Ministry of Information Science and Administration of Macedonia: Enhancing the Macedonian open Data portal to municipalities

▪ Albanian Association of Municipalities: Consequences of the territorial reform for the internal organisation of municipalities

▪ Civil Service Agency of the Federation Bosnia and Herzegovina: Implementation of CAF (Common Assessment Framework)

▪ Civil Service Agency of the Republic of Srpska, Bosnia and Herzegovina: Implementation of CAF (Common Assessment Framework)

▪ Municipality of Glogoc (Kosovo): Increasing transparency in local governments and managing citizens’ requests

▪ Civil protection and emergency situation service in the Republic of Moldova: Organisation of voluntary fire protection services


3 Pillar 3 - From LOGON Danube to LOGON 2020+

BACID supports the EU integration process in the West Balkan region and the Republic of Moldova by enabling local governments and local government associations to better deal with the impact of the EU acquis. Hereby, BACID refers to the experience of the LOGON (Local Governments Network) project from the Austrian Association of Cities and Towns and KDZ Centre for Public Administration Research during 1998-2008. LOGON gave assistance to local governments of EU candidate countries at that time and many local government associations of the Danube and Western Balkan region already participated in LOGON during this time. The environment and settings changed, but the objective remains the same: European integration with strong local governments.

The development of LOGON towards LOGON 2020+ reflects the new situation and developments in Europe and the European Union. Assisting local governments in the Danube and Western Balkan region to be better prepared for European integration requires a focus on the future developments in the EU and its planning for 2020+.

Therefore, this pillar is based on the cooperation with NALAS (Network of Associations of Local Authorities of South-East Europe)1, which gathers local government associations (LGAs) of South-East-Europe, including all BACID programme target countries (Albania, Bosnia and Herzegovina, Macedonia, Moldova, Montenegro, Serbia, Kosovo). BACID has supported NALAS through expert assistance, experience exchange, workshops etc. in implementing manifold activities:

▪ NALAS European integration roadmap

▪ Guideline “Applying EU Legislation for Energy Efficiency Measures at Local Level in South-East Europe”

▪ Guideline “Capacity Building and Improving Environment for Municipal Practice in Land Management and Taxation”

▪ “EU Programming – a Guideline for Local Government Associations, Cities and Municipalities in the West Balkan Countries & Moldova”

▪ Further development of a Regional Decentralisation Observatory, including expert support to the NALAS Task Force on Fiscal Decentralisation

▪ NALAS Fiscal Decentralisation Summer School 2016

▪ High-level conference on migration

▪ NALAS position paper on EU integration

▪ Applying for EU funds through expert support to the EU Project Managers Network

▪ Strengthening the cooperation with CEMR (Council of European Municipalities and Regions)

▪ Joint comments to the EC Public Consultations on “External Financial Instruments of the European Union” and the “White Paper on the Future of Europe – Europe 2025” (CEMR)

▪ Supporting the cooperation of NALAS with the CEMR project “PLATFORMA”, which needs joint lobbying towards the European Commission



Preface: BACID – the first three years of success

4 The book: The future of Europe – built on strong municipalities

This book is the final product of the BACID work concerning the European integration of local governments in the Danube and Western Balkan region. The articles show the broad range of topics that BACID has covered in the past three years. We selected topics that have been relevant in all three pillars (BACID Fund, Danube Governance Hub and LOGON) and we are aware that we “neglected” the various activities focusing on aspects of governance like CAF and open government. This is foreseen to be a topic for a future publication with additional input from the Danube Governance Hub.

In the first chapter, we asked municipal practitioners from the European Union to present their experiences with the impact of the European Union on local government. Based on the demands seen in the application of the BACID Fund and the mentorings, we selected the following topics:

▪ Subsidiarity in the European Union as an anchor of decentralisation

▪ Financing municipalities including public investments and the Fiscal Compact

▪ Public-private partnerships including public procurement

▪ Urban Agenda and regional policy

▪ Water sector and trade agreements

▪ Experiences with programming EU funds including the Danube Strategy and cross-border programmes

The second chapter focuses on the European integration activities of the local government associations in the candidate and potential candidate countries of the Western Balkans:

▪ The role of local government associations (LGAs) in the negotiation process

▪ Activities of the LGAs in Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia, including cooperation with CEMR (Council of European Municipalities and Regions)

▪ EU funds supporting the pre-accession phase

▪ NALAS position on EU enlargement

▪ Challenges of fiscal decentralisation in South-East Europe

▪ Council of Europe’s tool for improving the performance of local governments.


Based on the experience with the first phase of BACID between 2015 and 2017 and feedback from the local partners, we are currently preparing the proposal for the follow up activities under all three pillars: BACID Fund, Danube Governance Hub and LOGON 2020+. In the future ReSPA and NALAS as regional networks of both national and local level of public administration will not be only beneficiaries but closely involved as active partners. This reflects the success of the past BACID programme and the foundation of the cooperation 2018-2020.

Thank you to all who made BACID possible and contributed to the programme. See you in BACID II!


Table of Contents


Preface: BACID – the first three years of success .............................. 15

Chapter 1:

How to deal with EU-policies – the impact of the EU on municipal tasks ...................................................... 17

Thomas PROROK, Johannes SCHMID

The future of Europe: current and coming challenges for local governments ................................................................................. 19

Monika VANA

Subsidiarity – a view from Vienna and Brussels ................................. 28

Michaela KAUER

Cities as the living labs for the future of Europe – the EU Urban Agenda......................................................................................... 37


The EU fiscal rules as an obstacle for municipal services and investments ............................................................................................ 42


Privatizations endangering public investments – a municipal perspective ............................................................................................. 44

Heidrun MAIER-DE KRUIJFF, Johannes SCHMID, Janine PRANTL Public procurement: challenges for public undertakings .................. 49


Risks and advantages of public-private partnerships (PPPs)............ 56


Table of Contents


Alternative financing with citizen participation and crowdfunding ......................................................................................... 59


The impact of free trade agreements on water services..................... 66

Alexandra SCHANTL

The involvement of the local level in programming the Austrian EU funds .................................................................................. 69

Christiane BREZNIK, Ivana LAZIC, Mauro NOVELLO

EU Programmes 2021-2027 – How to involve local actors in programming Interreg ............................................................................ 76

Claudia SINGER

The Danube Financing Dialogue and the seed money facility START ..................................................................................................... 82

Chapter 2:

How to deal with the EU-enlargement – the municipal view..................................................................................... 87


The role of local government associations in the EU enlargement negotiations...................................................................... 89

Kelmend ZAJAZI, Joachim ROTH

Local governments and their associations as key stakeholders in the EU integration process – the NALAS Position Paper ............. 101

Marija ŠOŠIĆ

EU funding for local governments in the Western Balkans ............. 108

Gennadiy KOSYAK

The Council of Europe tools for improving performance of local authorities .................................................................................... 116



Trends in fiscal decentralisation in South-East Europe 2006-2014 .............................................................................................. 123


Local government associations and municipalities in Albania preparing for EU membership ............................................................. 131

Branislav MISOVIC

EU integration before getting candidate status – the role of local governments and the association in the Republic of Srpska, Bosnia and Herzegovina ........................................................ 137


Influence of the Montenegrin local governments and association in the EU integration processes ..................................... 141


ZELS role regarding a better absorption of EU funds for the municipalities ....................................................................................... 146


The role of the Standing Conference of Towns and Municipalities of Serbia (SCTM) in the EU integration ...................... 151

Frédéric VALLIER

CEMR experiences and support to local government associations in the EU enlargement ................................................... 162

Table of Contents
Biographies ............................................................................................ 165

Chapter 1:

How to deal with EU-policies – the impact of the EU on municipal


The future of Europe: current and coming challenges for local governments

Thomas PROROK, Johannes SCHMID

Subsidiarity – a view from Vienna and Brussels

Monika VANA

Cities as the living labs for the future of Europe – the EU Urban Agenda

Michaela KAUER

The EU fiscal rules as an obstacle for municipal services and investments


Privatizations endangering public investments – a municipal perspective


Public procurement: challenges for public undertakings


Risks and advantages of public-private partnerships (PPPs)


Alternative financing with citizen participation and crowdfunding


The impact of free trade agreements on water services


The involvement of the local level in programming the Austrian EU funds

Alexandra SCHANTL

EU Programmes 2021-2027 – How to involve local actors in programming Interreg

Christiane BREZNIK, Ivana LAZIC, Mauro NOVELLO

The Danube Financing Dialogue and the seed money facility START

Claudia SINGER

The future of Europe: current and coming challenges for local governments

In March 2017, the European Commission presented the “White Paper on the Future of Europe”1. The status quo and challenges of the European Union have been described in five scenarios. The introductory chart of the White Paper shows the big picture of the current challenges of the European Union and its complexity:

▪ Multi-Speed Europe: Upon first glance, we recognise a “multi-speed Europe”. The Euro Area and the Schengen Area do not cover all members of the EU.

▪ The Euro Area and the Schengen Area have faced huge challenges in recent years, which have led to reforms and changes in the fiscal and migration policies. These processes are ongoing and it has to be assumed that the final status of Euro and Schengen is still not reached.

▪ Brexit: The United Kingdom has decided to leave and is negotiating a new status of relationship with/outside the European Union.

▪ Economic Cooperation: With the European Customs Union, the European Economic Area and the European Free Trade Association different rules for economic cooperation with neighbourhood countries exist.

▪ Enlargement: EU candidate countries are Albania, Macedonia, Montenegro, Serbia and Turkey. Bosnia & Hercegovina and Kosovo are potential candidates. All candidate and potential candidates except Kosovo are members of the Council of Europe.

▪ Security and Defence Policy: Six EU countries are not members of the NATO. At the same time, a common European security and defence policy is still under negotiation.

1 European Commission COM(2017)2025 “White Paper on the Future of Europe”, of 1 March 2017, Brussels


Chart 1: Status quo of the European Union

Source: European Commission, “White Paper on the Future of Europe”, KDZ supplements

In preparation of the 60-year anniversary of the European Treaties of Rome on March 25, 2017, within the White Paper the European Commission presented five scenarios concerning how the Union could evolve by 2025.

Scenario 1: Carrying On – “The European Union focuses on delivering its positive reform agenda”. The title of the scenario is self-explaining. No further developments or deeper integration steps can be expected.

Scenario 2: Nothing but the Single Market – “The European Union is gradually re-centred on the single market”. The 27 member states do not agree on a common ground on an increasing number of policy areas. The integration process will slowly reset.

Scenario 3: Those Who Want More, Do More – “The European Union allows willing member states to do more together in specific areas”. So-called “coalitions of the willing” will emerge in different policy areas such as defence, internal security or social matters. The existing “multi-speed Europe” will expand.

Scenario 4: Doing Less, More Efficiently – “The European Union focuses on delivering more and faster in selected policy areas, while doing less elsewhere”. This leads to a European Union with limited resources and a focus on selected policy areas. In the long run, this would be a major step back to a weak single market or a free trade agreement.


Chapter 1: The future of Europe: current and coming challenges for local governments

Scenario 5: Doing Much More Together – “Member States decide to share more power, resources and decision-making across all policy areas”. The scenario comprises:

▪ a European Defence Union;

▪ a joint approach on migration;

▪ closer partnerships and increased investment in Europe’s neighbourhood;

▪ a stronger single market in the field of energy, digital and services;

▪ greater coordination on fiscal, social and taxation matters, as well as European supervision of financial services; and

▪ additional EU financial support for boosting economic development and responding to shocks at regional, sectoral and national level.

The EU is in change. A period of uncertainty regarding the future of the European Union has begun. Each scenario will have huge impacts on the local governments. This is also relevant for the candidate countries and their local governments. At present, it is unclear “which” European Union they will join. Local governments in the EU and the candidate countries should be aware of these changes and prepared to adapt to the different scenarios.

What future for Europe?

Therefore, referring to the White Book of the European Commission, the Council of European Municipalities and Regions (CEMR)2 presented the position paper “What future for Europe? – A vision from local and regional perspective”. CEMR calls on the European Commission to always consider the local and regional dimensions of EU reforms. Furthermore, CEMR stresses that:

▪ an active role for local and regional governments in the development and implementation of new EU solutions must be ensured;

▪ major global challenges such as security, migration, climate, energy, trade, and economic and fiscal policies are issues that are best addressed collectively;

▪ a more politically and economically integrated European Union must progress beyond the single market and provide genuine instruments of solidarity; and

▪ a particular focus on local democracy and the development of neighbouring countries should be kept.

Current EU policies relevant for the local level

Besides the “big” EU policies, local governments and local government associations work on manifold current topics. In any case, the future of Europe must also be seen as a municipal task. In recent years, the influence of European Union policy and legislation has significantly increased to the local level across Europe. Thus, questions about compliance with EU rules on public procurement, state aid or the controlling of co-financing

2 Council of European Municipalities and Regions (CEMR): “What future for Europe? – A vision from local and regional perspective”, 2017, Brussels


subsidies are daily business of the local governments. In Austria, the cities and municipalities are concerned with manifold European guidelines and thematic areas. A selection of the most important policies is presented in the following chapters.


The Comprehensive Economic and Trade Agreement (CETA) is a trade agreement between the EU and Canada. It removes customs duties and non-tariff barriers (e.g. environmental and social standards). From the local governments’ view, the “investor-state dispute settlement” is the most critical point. This is a mechanism for resolving disputes between governments and investors. In CETA, the new “Investment Court System (ICS)” should be responsible for solving these disputes.

Municipalities face the risk that foreign investors can force them to change decisions and laws or pay damages. In the long run, local public enterprises could come under pressure to privatise their services. The main problem is that the Investment Court System is not a state court; rather, it is based on international law and can result in a “David versus Goliath” situation where powerful international law firms negotiate with small municipalities and enforce their will on the costs of the public goods and citizens.

The final status of the Investment Court System is still under negotiation. Local governments and associations should carefully observe the developments concerning the Investment Court System of CETA.

2 EU Cohesion Policy 2020+

By 2020, the financial framework for EU regional policy will end, and new priorities will have to be defined for the 2020+ period. In essence, EU regional policy is an investment policy directed at all regions and cities in the European Union. It aims to create new jobs, strengthen the competitiveness of enterprises, increase economic growth, promote sustainable development and thus improve the quality of life of EU citizens. EU regional policy is also the key instrument for implementing the Europe 2020 strategy for smart, sustainable and inclusive growth in the European Union.

From the perspective of the local and regional governments, it is more than investment policy. The five objectives of the EU – “Employment”, “Research & Development”, “Climate Change & Sustainable Energy Management”, “Education” and “Poverty Reduction & Social Exclusion” –have to be further developed by the interaction of all stakeholders. EU regional policy holds the strongest importance in improving cohesion between EU member states, regions and cities and ultimately EU citizens. Thus, regional policy has a decisive impact on democracy policy and integration. In this respect, local governments must be supported accordingly. Regions and cities are particularly close to the citizens and their

3 For further information concerning CETA, see the article of Monika Vana.


Chapter 1: The future of Europe: current and coming challenges for local governments

importance for Europe and integration is not to be underestimated. For local and regional governments, the following questions will hold strong relevance:

▪ Can the principle of “investment in all regions” be maintained?

▪ What are the priority areas to be invested in the future (more infrastructure, more integration measures, etc.)?

▪ How should modern forms of cooperation and governance, civil society involvement, open government and transparency develop the cohesion policy?

▪ How can the regions and cities be better integrated into the creation of the national frameworks and partnership as well as the programming of the national programmes?

▪ What added value do macro regional strategies bring?

▪ How should the potential of functional regions be better supported by EU regional policy?

▪ How do the EU funds need to be reformed to react more flexibly to unforeseen developments?

3 Urban Agenda4

The Urban Agenda enables the cooperation between cities, the European Commission and member states on topics with urban dimensions. The main objectives are stimulating growth, liveability and innovation in the cities of Europe. Stakeholders from civil society and research organisations will be involved.

The Urban Agenda has been agreed in the Pact of Amsterdam in 2016 by the Ministers responsible for urban affairs. “Better regulation”, “better funding” and “better knowledge” of EU policy-making and implementation are the three main aspects of the Urban Agenda.

The main work is undertaken in twelve partnerships, in which interested cities define specific common working programmes together with partners from member states and EU involving also NGOs and businesses.

▪ Inclusion of Migrants and Refugees;

▪ Air Quality;

▪ Housing;

▪ Urban Poverty;

▪ Circular Economy;

▪ Digital Transition;

▪ Urban Mobility;

▪ Jobs and Skills in the Local Economy;

▪ Energy Transition;

▪ Climate Adaptation;

▪ Innovative and Responsible Public Procurement; and

▪ Sustainable Use of Land and Nature-Based Solutions.

4 For further information concerning “Urban Agenda”, see the article of Michaela Kauer.


The Urban Agenda holds strong importance for the European municipalities. It recognises the importance of urban issues and the competence of cities to contribute to solve the major future challenges of the EU (climate change, migration, poverty, digitalisation, etc.). Observing the progress of the Urban Agenda’s work and contributing to selected partnerships holds strong relevance for European local governments and associations.

4 Euro Zone and Fiscal Compact5

The recent global financial and economic crisis has led to a reorganisation of the EU’s governance structure, whereby 25 member states have signed the intergovernmental “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG or Fiscal Stability Treaty)”. This is a new stricter version of the Stability and Growth Pact, with the main requirement to have a balanced-budget rule in domestic legal orders (the Fiscal Compact). Twenty-two member states are formally bound by the Fiscal Compact. These are the nineteen euro zone members plus Bulgaria, Denmark and Romania, which opted in to the Treaty. Additional regulations and directives (the so-called six pack and two pack) complete the Treaty. The implementation of these new regulations into national law took place in Austria to a large extent through the Austrian Stability Pact.

The Fiscal Compact requires that:

▪ the national budget has to be in balance or surplus;

▪ a national independent monitoring institution should provide fiscal surveillance;

▪ the general budget deficit must not exceed 3.0% of the gross domestic product (GDP);

▪ the annual structural deficit should not exceed 0.5% of GDP for states with a debt-to-GDP ratio exceeding 60% - or at most 1.0% of GDP for states with debt levels within the 60% limit; and

▪ a public debt higher than 60 % of GDP has to be reduced annually by 1/20 of the debt exceeding the 60% threshold.

The Fiscal Compact foresees automatic sanctions and correction mechanisms for sustained exceeding of the deficit and debt limits. In addition, several instruments for the defence of state bankruptcies (“rescue parachutes”) have been created. In particular, these are the EFSF (European Financial Stability Facility) as a temporary “rescue umbrella” as well as the ESM (European Stability Mechanism) as a permanent “protection mechanism” from July 2012.

The Fiscal Compact can have strong relevance for the municipalities. In the Austrian case, the national implementation of the Fiscal Compact states that the municipalities must have balanced budgets on the national average. All municipalities together must not contribute a deficit to the state budget. This means that the national and regional level are allowed to make deficits within the limits of the European Fiscal Compact, although

5 For further information concerning the Fiscal Compact, see the article of Michael Kremser.


Chapter 1: The future of Europe: current and coming challenges for local governments

the municipalities need a balanced budget. This shows the possible impact of the European regulations on the municipalities and the need to carefully observe these negotiations.

5 General Data Protection Regulation

Data protection in Austria will have to be completely revised by May 2018. The changes and requirements are widely discussed and will also have implications at the local level.

The Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) entered into force on 25 May 2016 and are to be implemented within 24 months (25 May 2018)6. The regulation harmonises the processing of personal data and the free movement of such data through private companies and public authorities. Since it is a regulation, it is immediately transferable in the member states. In some cases, national legislation is possible.

Even with the new regulation, in very few cases only the question of whether data processing is allowed or not will be assessed differently.

The new regulation will bring substantial changes concerning data processing itself, like the obligatory processing directory or the appointment of a data protection officer.

Even though the local governments are exempted from the harsh pecuniary fines, they are well advised to follow the new rules to prevent damage.

6 A new public procurement

The new EU public procurement directives entered into force on 18 April 20167. At the time of writing (Sept 2017) this article, Austria has yet to implement the directives, which means that Austria is in breach of the implementation requirements and will face infringement proceedings if the implementation into national law does not happen soon.8

The EU procurement package includes exemptions for in-house services, an extension of negotiation procedures and framework agreements as well as an increased possibility of correcting faulty documents. It offers the local level new options of flexibility.

6 (19.9.2017)

7 (19.9.2017)

8 i.e.


With the revised national procurement law since 1 March 2016, Austria has specifically introduced public procurement procedures to consider not only low-cost criteria but also quality and social criteria as technical specifications to fight wage and social dumping.9

Many experts state that these new rules will have positive impacts on the Austrian municipalities, because administrative burdens have been reduced and the new selection criteria will fit better to the municipal needs. However, some experts criticise that the new public procurement rules are incompatible with EU law.

7 Social housing in cities

The EU Commission has already criticised several member states due to their national laws on municipal housing. Some governments used this as an excuse to considerably limit the scope in housing for the local level10 An initiative of 27 cities (including Vienna) wants to counterbalance these actions. The cities claim the autonomy of housing policy in the member states and demand a broad definition of social/municipal housing in general.11

In general, the construction of housing and rental policy is an autonomous competence of member states. Therefore, we assume that if an apartment had been built with subsidies, it is the member state (i.e. the Länder in the Austrian case) that decides who may get this apartment. Unfortunately, this is not the case, given that the European Commission as the executive body of the EU increasingly tries to influence this area of (social) policy. On the one hand, the European Commission intervenes via the EU competition law and its exemptions (state aid in the case of services of general economic interest), while on the other hand via EU energy policy, which constitutes a shared competence between member states and the EU.

In two member states (Sweden and the Netherlands), citizens living in social housing are already confronted with profound changes. A third member state (France) has already announced that any review procedure of the French law will be considered as unjustified interference in national law.

Mayors in many European cities are worried about the future of subsidised housing and thus the social cohesion of their cities. The key demands are to respect the autonomous decisions of the member states about the definition and organisation of social housing as well as the legal independence of social housing from EU competition law. Affordable housing for all citizens is a Service of General Economic Interest and should not fall under competition law or be restricted only to the poor.12

9 (19.9.2017)



12 ie. (19.9.2017)


Chapter 1: The future of Europe: current and coming challenges for local governments


The future of Europe is also a task for local governments. Over the last couple of years, the influence of EU politics and legislation on local governments has considerably intensified. Local governments are daily challenged with questions of the correct implementation of EU law.

Nearly 75% of the EU population lives in cities and urban areas. Regarding European Commission President Juncker and his ambitious 300 billion euro growth package, it is the local governments that hold the key to growth.

The member states are encouraged to use the competence of local governments to provide feasible solutions. Local governments already have answers for problems that member states will be confronted with much later. Local governments have to react much quicker to find adequate solutions than member states in all tasks that hold strong importance for the citizens.


Monika VANA

Subsidiarity – a view from Vienna and Brussels

1 My connection with this subject

The subject of subsidiarity has accompanied me for many years in my political life. Before I became an MEP, I was involved in local politics in Vienna for thirteen years (from 2001 to 2014), as a municipal councillor responsible – among other things – for European policy, as an executive city councillor without portfolio, and from 2011-2014 as Deputy Chair of the newly-created City Council’s Committee for European and International Affairs (GReiA). My main areas of focus – including gender equality and labour market policies – repeatedly brought me into contact with the subject of subsidiarity; for example, in the context of defending public services against liberalisation and privatisation processes.

As an MEP, I am now regularly confronted with the subject both in the Committee on Regional Development (REGI) and as Vice-Chair of the Intergroup on Public Services.

For me, the principle of subsidiarity is an interesting but ambivalent instrument, not only due to my ‘double point of view’ from Vienna and Brussels (i.e. from the sub-national and the supranational level), but also for reasons related to the content. As a convinced European, I fight for MORE Europe (e.g. in the area of social policy or the distribution of refugees), for stronger European institutions (e.g. by enhancing the role of the European Parliament or introducing Europe-wide referenda), but also for an ALTERNATIVE Europe (e.g. a fundamental reform of the Stability and Growth Pact which has had some devastating effects on cities and regions). The crucial point is to maintain the political and budgetary capacity to act at all levels: the European, national and regional/local levels are closely interrelated.

The principle of subsidiarity and the subsidiarity check introduced by the Lisbon Treaty could play a decisive role in this respect, in strengthening the possibilities for national and especially regional levels to directly participate within the institutional setup of the EU; for instance, the national level is actively involved in the EU legislative process through the Council of the EU, whereas the regional level only participates through the Committee of the Regions, which mainly has an advisory role. However, in practice, rather than leading to serious reflection on the competences of each level, I find that the subject of subsidiarity is discussed in a somewhat indefinite manner and – depending on the line of argument – it is used either for or against more influence for the Member States or regions.

Monika VANA

Chapter 1: Subsidiarity – a view from Vienna and Brussels

2 The principle of subsidiarity

The intellectual-historical roots of subsidiarity date back to Calvinistic conceptions of community in the 16th century (the Synod of Emden, Johannes Althusius) and were taken up and further developed by Catholic social doctrine from the 19th century onwards. In her article on ‘Subsidiarity - an idea with a history’ (Heinrich Böll Stiftung, 2009), Tine Stein refers to several papal social encyclicals, in particular ‘Rerum Novarum’ (Pope Leo XIII, 1891), ‘Quadragesimo Anno’ (Pius XI, 1931) as well as ‘Mater et magistra’ (1961) and ‘Pacem in Terris’ (1963) by John XXIII. These all convey the idea that the higher-order social authorities should provide support and funding (‘subsidium’) to the smaller communities, albeit without intervening in such a way as to absorb them or undermine their strengths. Initially there is a strong emphasis on criticism of ‘excessive state control’, although some of the encyclicals issued after World War II already anticipate the views of the later anti-globalisation movement. Even the inaugural encyclical ‘Deus Caritas est’ (2005) by the conservative Pope Benedict XIV defines a just society as one that – with regard to the principle of subsidiarity –would guarantee everyone a share in the goods of the community; however, such structures would not under any circumstances make Christian charity redundant.

In the context of European integration, it was only at a very late stage that the principle of subsidiarity was introduced: it was prompted by the growing concern of some EC Member States from the 1970s onwards about the uncontrolled transfer of powers to the community level, which resulted in the gradual introduction of rules aimed at limiting competences.

3 Subsidiarity and the EU

Subsidiarity and proportionality were only adopted as general principles governing the exercise of competence by the Maastricht Treaty (which entered into force on 1 November 1993), with which the EC became the European Union.

Today, the principle of subsidiarity is laid down in Article 5(3) of the Treaty on European Union (TEU):

“3. Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level. The institutions of the Union shall apply the principle of subsidiarity as laid down in the Protocol on the application of the principles of subsidiarity and proportionality. National Parliaments ensure compliance with the principle of subsidiarity in accordance with the procedure set out in that Protocol.”

The application of the principle of subsidiarity and the control mechanisms are laid down in the protocol on the application of the principles of subsidiarity and proportionality. This protocol was originally established


by the Treaty of Amsterdam (which entered into force on 1 May 1999), and at that point already provided that certain conditions must be met during the preparation of draft legislative acts; for example, that the Commission must add a note to each draft legislative act stating that the principles of subsidiarity and proportionality have been fulfilled.

The Treaty of Lisbon – which entered into force on 1 December 2009 –subsequently reformed the protocol (now Protocol No 2) and fully involved the national parliaments in the monitoring of the principle of subsidiarity.

Moreover, Article 6 of the protocol specifies that it is the responsibility of each national parliament or each chamber of a national parliament to consult – where appropriate – regional parliaments with legislative powers: in Austria, the Landtage.

National parliaments may address a ‘reasoned opinion’ to the EU institutions, stating why they consider that a proposal does not comply with the principle of subsidiarity, namely the so-called subsidiarity objection

Each national parliament has two votes, or in bicameral systems each chamber has one vote (in Austria the Nationalrat (the lower house) and the Bundesrat (the upper house)). If subsidiarity objections represent a third (prior to the implementation of ‘Brexit’, 19 out of 56) or – in the area of justice and home affairs – a quarter of the votes allocated to the parliaments of the Member States, the proposal must be reviewed, reflecting the so-called ‘yellow card’ within the ‘early warning system’.

After such a review and in accordance with Article 7(2) of the protocol, the Commission may decide to maintain, amend or withdraw the draft legislative proposal. Reasons must be given for this decision.

The so-called ‘orange card’ applies if there is a simple majority of the votes, although this has not yet (as of 2016) arisen. In this case, if the Commission maintains its proposal, the EP and the Council decide.

Furthermore, Article 8 of the protocol allows the national parliaments and the Committee of the Regions to bring proceedings against legislative acts before the Court of Justice of the European Union if they consider that the principle of subsidiarity has not been complied with.

4 The European Affairs Committee in Vienna

Before 2011, opinions from Vienna on subsidiarity were drawn up and submitted by the administration or at the government level. A commission within the municipal council reported on and discussed Vienna’s international activities and networks and European public policy issues. The red-green governmental agreement of November 2010 (the first such agreement at regional level in Austria) created the City Council’s Committee for European and International Affairs (GReiA), giving a new dimension to Vienna’s European and subsidiarity policies. The decision taken in 2011 to grant MEPs the right to speak at City Council sessions was another milestone. The GReiA was chaired until 2015 by municipal councillor Elisabeth Vitouch, after which Muna Duzdar took over until she was called to serve


Chapter 1: Subsidiarity – a view from Vienna and Brussels

the federal government in May 2016, and since then it has been chaired by municipal councillor Peter Florianschütz.

In addition to its information activities, expert seminars, discussion of the city of Vienna’s annual Europe report, etc., the Committee’s work gained added value when the Vienna Landtag authorised it on 1 April 2011, “on behalf of the Landtag, to deliver opinions on EU legislative acts to the Bundesrat and its EU committee, setting out why the legislation concerned does not comply with the principle of subsidiarity”.

To date, the GReiA has found that the following proposals are incompatible with the principle of subsidiarity:

21 February 2012: Directive on concession contracts, COM (2011) 897.

21 March 2012: EU data protection package.

21 March 2012: Proposal on a Union civil protection mechanism, COM (2011) 934.

7 March 2013: Proposal for an amendment of the Regulation on the opening of the market for domestic passenger transport services by rail.

5 September 2013: Commission Regulation adapting legal acts making reference to the regulatory procedure with scrutiny.

6 May 2014: Proposal of the European Parliament and of the Council on organic production and labelling of organic products.

18 September 2014: Proposal for a Directive of the European Parliament and of the Council amending Directives on waste, packaging and packaging waste, on the landfill of waste, on end-of-life vehicles, on batteries and accumulators and waste batteries and accumulators, and on waste electrical and electronic equipment.

7 May 2015 and 26 April 2017: Communications of the European Commission under the heading ‘Energy Union Package’ and Legislative proposals concerning the recast of the Internal Electricity Market Directive and of the Renewable Energy Directive (‘Winter Package’).

The justifications vary, although there is frequent criticism of the increase in so-called delegated acts (the empowerment of the Commission to enact detailed provisions for the implementation of legislation on its own), the unreasonable increase of red tape, and some criticism of the obstacles to the regional provision of the appropriate quality of supply.

One of the greatest problems – not least for an informed thematic debate – is the eight-week period (as laid down in the protocol on the application of the principles of subsidiarity and proportionality) within which the national parliaments or chambers must submit their subsidiarity objections. This is definitely too short for a qualitative debate: the debate within one province alone takes time, as does coming to an agreement with other provinces. Decisions are thus often taken de facto at the administrative level, without any discussion within a political body. An extension of the


eight-week period for the subsidiarity objection would thus be an important reforming step towards practicability.

5 Subsidiarity in Austria

In Austria, the Nationalrat and the Bundesrat (or its EU committee) can submit subsidiarity objections. The Bundesrat in particular often accepts the arguments put forward by the federal provinces, especially when they draw up common positions.

The Commission’s annual work programme provides an overview of the planned legislative and non-legislative initiatives. Under Article 23f(2) of the Austrian Federal Constitution (B-VG), the federal minister responsible must submit to the Nationalrat and the Bundesrat a preview of the expected proposals of the Commission and the Council, including the probable Austrian position on these proposals, by 31 January of the respective calendar year. Article 23g(3) B-VG provides that the Bundesrat must inform the Landtage immediately about any proposals with subsidiarity-related issues and give them the opportunity to submit their opinion.

A conference of experts from the federal provinces on the domestic implementation of the subsidiarity check usually takes place in the second half of January. At this conference, the Commission’s work programme is discussed and the initiatives that are judged to be relevant to the principle of subsidiarity and the provinces are allocated to the individual provinces. Once they have been published in the course of the year, these initiatives are then subjected to a subsidiarity check. The suggestions of the individual provinces for a position statement are then sent to the liaison office of the provinces, which distributes them to the other provinces, where they are examined by the competent departments (one example in Vienna is Municipal Department 27 - European Affairs). Due to time constraints, committees such as the GReiA in Vienna are rarely involved in the decisionmaking process. The response is sent via the authorities of the provincial governments.

One problem in particular – besides the above-mentioned very short eight-week period, which starts as soon as the legislative proposal is available in all official EU languages – arises when agreement with other provinces is necessary. The tendency to find the ‘lowest common denominator’ means that the original proposal is often better than the agreed text.

One example that illustrates this is the attempt in the spring of 2015 to submit – in accordance with Article 23d(2) B-VG – a common opinion of the provinces on the TTIP free trade agreement. Although this opinion was not a so-called subsidiarity objection, it was an opinion to be taken into account by the federal government in its negotiations and votes in the European Union.

Vienna drew up an opinion in March 2015 that particularly criticised two areas – regulatory cooperation and the provisional application of the agreement – and called on the federal government to take a negative stance during the vote in the Council. The text was unanimously approved by the GReiA at its meeting on 9 April. Lower Austria then presented an


Chapter 1: Subsidiarity – a view from Vienna and Brussels

alternative draft, contradicting the two key issues of the Vienna proposal and attempting to dilute the position on the ISDS (investor-state dispute settlement) that had been agreed in 2014. Vienna responded by submitting a compromise proposal that included some of Lower Austria’s concerns; for example, that all currently protected EU indications of geographical origin and designations of origin should also be protected in the USA. However, in the last week of June, the Styrian provincial government subsequently submitted an opinion suggesting the establishment of ‘a multilateral investment arbitration tribunal or dispute settlement procedure that complies with the standards of the rule of law’, which would have been tantamount to dropping the rejection of ISDS. The result was thus that no common opinion of the provinces could be submitted, which was a missed opportunity that was only mitigated by the fact that the provinces had already produced an ambitious and TTIP-critical opinion in May 2014.

It is probable that given the different compositions of the provincial governments, it will be difficult to find common positions on controversial issues such as migration in the future.

Since the Juncker Commission took office in 2014, the number of EU legislative proposals has decreased, thus leading to a reduction in subsidiarity checks.

In addition to subsidiarity objections, the provinces and provincial parliaments can also submit comments on the substance of EU proposals, whereby extensive use is made of this possibility.

6 The positive role of subsidiarity

Through my work in the European Parliament, I am aware that the most important aspect of the principle of subsidiarity is the contribution that it makes towards the protection of public services and provisions. Although local self-government for these services is also enshrined in the Treaty of Lisbon, there are repeated proposals to step up forced market-opening efforts and introduce unrestricted tendering procedures in this area. Critical comments from national and regional bodies are very helpful in this respect and have been as an instrument: from the Bolkestein Directive (2004/05) and the Monti II Regulation (2012) to the 4th railway package (2013) and TTIP (2014).

For example, in paragraph 17 of the Vienna Declaration on Europe approved by the city council on 29 June 2011, the City of Vienna states unequivocally that: “Legal recognition of the priority of functioning public services over the principles of the internal market and competition law and flexibilisation of EU state aid legislation with regard to the financing of services of general economic interest enable the provision of high-quality public services as a pillar of the European social model. There must be no compulsory liberalisation of public services, particularly water supply and wastewater disposal, health care and social services.”

I would like to emphasise that similar opinions are held not only by redgreen-governed municipalities and regions, but also by those governed by conservatives with an interest in functioning and sustainable local politics.


7 The area of tension between subsidiarity and solidarity

Subsidiarity originally had a social aspect (see Chapter 2). However, the use of the instrument of subsidiarity objections by Member States has shown that such objections are increasingly motivated by lobbying and anti-centralist agendas. I would like to demonstrate this development using the three cases in which the instrument of the so-called ‘yellow card’ has been used to date.

The first of the so-called yellow cards came into play in May 2012 for the Proposal for a Council Regulation on the exercise of the right to take collective action within the context of the freedom of establishment and the freedom to provide services (COM (2012) 130), the so-called Monti II Regulation. In the draft, the principle of the equal status of fundamental social rights and economic freedoms was assumed. In connection with the exercise of collective action such as – in particular – the right to strike, economic market freedoms should be protected. There was opposition to this from the trade unions and civil society. Twelve national parliaments or chambers (Belgium, Denmark, Finland, France, Latvia, Luxembourg, Malta, the Netherlands, Poland, Portugal, Sweden and the UK) with a total of 19 of the then 54 votes submitted objections, whereby the necessary quorum of one-third was thus exceeded. In September 2012, the Commission stated that it would not further pursue its proposal for a regulation.

Thus, at that point in time the main priority was still the defence of trade union rights.

When the second yellow card was used in October 2013 against the establishment of a European Public Prosecutor’s Office to better protect the financial interests of the Union (COM (2013) 534), it was evident that the aim of some countries was to avoid close scrutiny of their use of EU funds. Fourteen Parliaments and chambers from eleven countries with a total of eighteen votes (Cyprus, the Czech Republic, France, Hungary, Ireland, Malta, the Netherlands, Romania, Slovenia, Sweden and the UK) issued objections. However, the Commission remains firmly committed to its plans. In June 2017, 20 Member States reached a political agreement on the establishment of the new European Public Prosecutor’s Office under enhanced cooperation. Among those countries standing apart were Poland and Hungary.

Indeed, when the third and most recent yellow card was used in May 2016 against the revision of the Posting of Workers Directive (COM (2016) 128) aimed at implementing the principle of equal pay for equal work in the same place, the objective, although not openly expressed, was to block measures against so-called ‘social dumping’ and to profit from the different wage levels across the EU. Fourteen parliaments and chambers from eleven countries objected: Bulgaria, Croatia, the Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. These are all Central and Eastern European countries that have joined the EU since 2004 (with the exception of Slovenia) and Denmark, with its right-wing liberal government. However, the Commission rejected


Chapter 1: Subsidiarity – a view from Vienna and Brussels

the criticism. Marianne Thyssen, EU Commissioner for Social Affairs, stated: “But it is my duty to say that the objective of the single market is not to establish an economic model based exclusively on lower wages. The single market is not somewhere where everything is permitted; there is a need for rules. And the social market economy means that when establishing commonalities we should be aiming up and not down” (, 20.7.2016).

These examples demonstrate that objections on subsidiarity grounds can be motivated by political self-interest, on topics that clearly cannot be solved at the national level. Similarly, the subsidiarity argument may be used at the regional level by interest groups to defend rigid practices (corruption) or prevent the introduction of higher social and environmental standards (e.g. environmental constraints).

In day-to-day political practice, I frequently observe an area of tension between the principle of subsidiarity – which is clearly regulated (see above) – and the value of ‘solidarity’ referred to; for example, in the EU Charter of Fundamental Rights (2010/C 83/02), both in the Preamble (“conscious of its spiritual and moral heritage, the Union is founded on the indivisible, universal values of human dignity, freedom, equality and solidarity”) as well as in Title IV (Articles 27 to 38).

In this context, with reference to the roots of the principle of subsidiarity in Catholic social teaching, it is interesting to quote Pope Francis I, who said on 25 November 2014, when addressing the European Parliament and the Council of Europe in Strasbourg: “The motto of the European Union is United in Diversity. Unity, however, does not mean uniformity of political, economic and cultural life, or ways of thinking. Indeed, all authentic unity draws from the rich diversities which make it up: in this sense it is like a family, which is all the more united when each of its members is free to be fully himself or herself. (...) At the same time, the specific features of each one represent an authentic richness to the degree that they are placed at the service of all. The proper configuration of the European Union must always be respected, based as it is on the principles of solidarity and subsidiarity, so that mutual assistance can prevail and progress can be made on the basis of mutual trust. (...) It is no secret that a conception of unity seen as uniformity strikes at the vitality of the democratic system, weakening the rich, fruitful and constructive interplay of organizations and political parties. (...) Keeping democracies alive is a challenge in the present historic moment. The true strength of our democracies – understood as expressions of the political will of the people – must not be allowed to collapse under the pressure of multinational interests which are not universal, which weaken them and turn them into uniform systems of economic power at the service of unseen empires. This is one of the challenges which history sets before you today.” (Source: content/francesco/en/speeches/2014/november/documents/papa-francesco_ 20141125_strasburgo-parlamento-europeo.html)

Thus, solidarity and subsidiarity are not seen as opposites here, but rather as two fundamental principles that – when taken seriously – demand a critical scrutiny of the neoliberal excesses of so-called globalisation.


8 Summary

While subsidiarity was originally a principle of Catholic social doctrine, nowadays it is above all an instrument to regulate the balance of competences between the EU and the Member States and their parliaments.

Nevertheless, it is worth looking at the subject from a political perspective

The principle of subsidiarity can serve to rein in negative developments (e.g. with a view to preserving services of general interest).

It is also positive that the subsidiarity checks anchored in the EU treaties – notably Protocol No 2 – allow both national and regional parliaments (for example the Austrian federal provinces) to consider legislative proposals at an early stage. Through this involvement, political decision-makers are called upon to play a greater role in European affairs, bringing Europe closer to its citizens and increasing the transparency of the European legislative process.

It should nevertheless be noted that current developments – for example, concerning the ‘yellow cards’ as part of the ‘early warning system’ – are heading in a direction that is contrary to the principle of solidarity.

Given the current rise of Eurosceptic and even Europhobic parties, learning to deal with this ambivalence will probably remain one of the challenges for the coming years.



Cities as the living labs for the future of Europe – the EU Urban Agenda

In this article, the author provides an overview of the EU Urban Agenda and the urban dimension not only in regional policy, but also EU policy development and the role of cities in general. She reflects on the genesis of the EU Urban Agenda, elaborates on the new working method that it creates for cities to share their expertise at an equal level with Member States and EU institutions and explores the potential impact on municipal services and companies.

To put a long story short: the EU Urban Agenda1 - as it was decided at the June Council meeting and in the “Pact of Amsterdam2” – has a genesis with highs and lows, ups and downs throughout recent decades. This history is as long as cities have been demanding to become involved directly with EU policy development: a demand that they based on two simple facts. First, evidence shows that about two-thirds of the EU population live in cities, towns or urban areas. This should provide a deeply democratic argument for direct involvement due to the impact of third-party decisions. Second, cities are the hotspot of all major developments: they are the hubs for innovation and growth, they are at the forefront of new societal patterns and they are the places with the highest density of people with all positive and negative effects. In brief, they constitute the living labs for the future of Europe. Leaving them out of the process means simply ignoring their long-held existing expertise in integrated policy-making.

The “Pact of Amsterdam” is the result of a process that started more than 20 years ago. The more important that regional policy – and funding – became, the greater the volume with which cities asked to be directly involved in the development of programmes. The first “URBAN” programmes3 out of the Structural Funds that we have seen emerging in Vienna show the impressing transformation of the belt street around the inner-city districts, “Gürtel”, from an unsafe “no-go area” to a hip culture lane. This is an example of what difference can be achieved when funding is concentrated on an urban project that triggers further investment. However, the overall effect of this investment cannot be seen immediately. Change takes time, even in a vibrant and fast-growing city like Vienna.


2 Pact of Amsterdam; decided at the General Affairs Council on 24 June 2016 v7_WEB.pdf

3 URBAN I Gürtelsanierung – also see archive/urban2/pdf/urban1_vienna.pdf

1: Cities as the living labs for the future of Europe – the EU Urban Agenda

Step by step towards the urban dimension

Regarding funding, we have not really come forward. Small steps seem to be the normal approach, as in the current funding period (2014-2020) only a very small share of the funds is allocated directly to cities.4

The other strand of activities of cities and their networks and organisations have focussed on the effects of EU legislation on their ability to steer, define and finance the services that their citizens need. Accordingly, we have seen the results of liberalisation and privatisation in many areas, often not for the better from the citizens’ perspective. Sometimes, it is acknowledged that cities simply felt they had no other choice than to sell of parts of their services and properties for mere budgetary reasons. This has happened with municipal housing in Berlin, waterworks in Paris and national rail in the UK. In most cases, the quick wins were to the detriment of consumers and at the cost of quality and stability in the service. Vienna and other cities have been joining forces ever since to highlight the possible effects of these measures. Wherever EU legislation opened a door, cities reminded the EU about the principle of subsidiarity: it should be left to the cities and their leaders how they – democratically elected – define the services of general interest of their respective constituency. Moreover, we often saw reluctance to accept the notion that integrated city solutions might be better and more practical, as well as more sustainable in the long run. Introducing this expertise into an organisation working along a sectoral rather than a holistic principle is a challenge for both sides.

We have seen numerous efforts to include an urban dimension in the EU’s regional policy with important conferences and documents like the Leipzig Charta (2007)5, the Marseille Statement (2008) and the Toledo Declaration6. We have welcomed the fact that the Treaty of Lissabon7 reinforced the principle of subsidiarity and empowered the Committee of the Regions with more rights and possibilities. In 2013, the European Commission renamed the service for Regional Policy as the Regional and Urban Policy8. The Member States with their different competences met irregularly on an informal political level, which was mainly initiated by “urbanminded” countries like the Netherlands, and they have created an “Urban Development Group9” to follow the processes. It is interesting to note that no cities or their European organisations are formal members of this group.

4 ITI also see toledo_declaration_en.pdf

5 Leipzig Charter: leipzig_charter.pdf

6 Toledo Informal Meeting of Ministers for Urban Development on 22 June 2010 declaration_en.pdf

7 Article 5(3) of the Treaty on European Union (TEU) and Protocol (No 2) on the application of the principles of subsidiarity and proportionality.

8 See speech of Commissioner Hahn on 12 December 2013:

9 For more information about the UDG, see:


Chapter 1: Cities as the living labs for the future of Europe – the EU Urban Agenda

An Urban Agenda created by partnerships of cities, member states and the EU

However, it is only now – in 2017 – that this has eventually led to the creation of a level playing field for cities, Member States and EU institutions: the “Urban Partnerships10”. Along twelve different themes, twelve partnerships will define what should be improved in the regulatory or financial framework of the EU with the expertise of cities. The partnerships should comprise five cities and Members States, relevant EU institutions and other stakeholders and work based on an Action Plan to deliver results within two to three years. As it is new format of policy development, some processes still need clarification. However, in most areas, cities and their networks have already developed a clear position regarding EU legislation and funding. This knowledge and expertise can now better feed-in the policy development directly.

The first four pilot partnerships started in late 2015 and early 2016, covering important policy areas for cities: housing, the inclusion of migrants and refugees, air quality and urban poverty. The choice of issues naturally reflects the most urgent areas for improvement. Many large European cities are growing, and affordable housing is key to social cohesion and sustainable development. Cities are the backbone of the integration policies, as not only migrants but also refugees move to cities and towns. Air quality is a major issue, with a clear bias to climate policy, mobility and health. Urban poverty – especially among children – holds relevance to many cities where social and geographic fragmentation is strong, thus leading to enormous challenges for public authorities.

When looking at these issues, one can easily identify the expected impact on cities and their services or their public companies: from a city perspective, things should become easier. This means that cities that have taken in a high number of refugees and welcomed many migrants should have better – i.e. direct – access to EU funding in the next period, e.g. in the ESF or ERDF. It also means that cities that have a need for housing do not have to fear legal complaints by institutional investors based on the existing state aid rules and they have to room to manage their housing policy without interference.

The remaining eight partnerships will tackle equally important issues:

▪ Jobs and skills in the local economy

▪ Sustainable use of land and nature-based solutions

▪ Circular economy

▪ Climate adaptation

▪ Energy transition

▪ Urban mobility

▪ Digital transition

▪ Innovative and responsible public procurement

The complete list reflects the major issues of a good life quality for all citizens: healthy, environmentally- and socially-sustainable, inclusive cities



that remain able to react to new developments in a globalised economy. It also shows that the partners in the urban agenda are aware of the two major challenges that frame current policy-making, namely the need to overcome the financial and economic crisis and combat climate change. The future legal and financial framework of the EU must give cities more room to manoeuvre. We can assess that municipal services are involved in all of these issues, despite the difference in competences across the Member States.

Good governance and transparency

The issues of the partnerships are often interconnected, and there is a major task of coordination and exploring overlapping or missing fields ahead of all actors. Cities and their organisations – like EUROCITIES11 –have already set up structures to liaise back with their members, let them know what is going on, how findings connect (or not) to existing positions and make the process as transparent as possible. Some of the stakeholders have also done this. Transparency will be a key factor for a successful process and it needs to be guaranteed throughout the whole duration of the partnership.

In some cases, the EU agenda setting will prompt the need to deliver quick results, as in the case of the State Aid issue in the housing partnership – where a revision of the current package is due in 2017 – or with the circular economy partnership, which will have to react to the announced Waste-to-Energy proposals of the Commission. It would be a good sign if the partnerships could already contribute to this at an early stage. Again, the common findings of the partnerships should be communicated in an open process, and there must be clarity about the endorsement of their proposals by the steering body of the twelve partnerships.

In order to gain credibility, the composition of each partnership must be comprehensive. A variety of cities and Member States is desirable, whereby stakeholders must be representative and competent. Each member is accountable to a body, whether cooperative or public, local or European. In fact, as it is an effort in investing resources to participate for the partners, accountability towards both the respective organisations and the partnership as a whole is vital.

Multi-level governance, revisited: Multi-level democracy

As this is a new working method, flexibility is naturally needed. Organisations involved work with different rhythms and they need to give themselves the time to play the same tune to get the most out of the orchestra. Expectations and hopes are high, and all parties need to overcome their usual routines and rituals. It will be an important step already if we can ensure that cities´ expertise is naturally accepted by the European Commission. This goes beyond the usual consultation and listing of good


Michaela KAUER

Chapter 1: Cities as the living labs for the future of Europe – the EU Urban Agenda

practices. This means a real change in attitudes, acknowledging the important role of cities for the quality of life for all. Giving cities a strong voice in Europe is not a question of respect; rather, it is crucial to reconnect Europe to its citizens.



The EU fiscal rules as an obstacle for municipal services and investments

In accordance with Regulation (EC) No 1466/97, amended by Regulation (EU) No 1175/2011, euro area Member States are required to submit a Stability Program each year, while other EU Member States have to submit a Convergence Program.

This program is part of the European Semester and it is approved by the Austrian Federal Government in accordance with the Austrian Stability Pact 2012 (ÖStP 2012), taking into consideration budget coordination within Austria. At the same time, this document covers the national medium-term budgetary plan according to Article 4 of Regulation (EU) No 473/2013 (“Two-Pack”).

The Stability Program is submitted together with the National Reform Program to the Council of the European Union and the European Commission, as well as the Austrian National Council, financial equalization partners and social partners.

Due to the developments in Europe related to a reinforced economic governance of the EU Member States (“Six-Pack”, “Two-Pack” and fiscal pact), the 2011 Austrian Stability Pact had to be changed. The Stability Pact in 2012 entered retroactively into force on January 1, 2012 and was –in contrast to previous agreements – principally concluded for an indefinite period. However, Article 28 para. 6 ÖStP 2012 includes a list of circumstances under which the agreement shall automatically expire [e.g. when the FAG (Financial Equalization Law) expires and the new regulation is not accepted by the states and municipalities].

The key points of the Austrian Stability Pact 2012 (ÖStP 2012) are as follows:

▪ The federal government and the states commit to not exceed their respective deficit limits in the years 2012 to 2016. The municipalities have to achieve a balanced budget by ESA (Maastricht deficit) in the years 2012 to 2016.

▪ Regulations relating to the permissible structural balance (debt brake): from 2017 onwards, the budgets of local authorities essentially have to be balanced or in surplus. This principle is complied with if the annual structural balance of Austria does not exceed -0.45% of nominal GDP (Federal level 0.35% of nominal GDP, states and municipalities -0.1% of nominal GDP). The monitoring of compliance is carried out in specially established control accounts.

▪ Rules on the permissible expenditure growth (output brake).

▪ Rules on the reduction of government debt (debt ratio adjustment).

▪ Provisions on limits of liability.


▪ Arrangements to improve the coordination of financial management between the authorities, the medium-term budgetary planning, mutual information and to increase the transparency of the financial management

▪ Rules via a penalty system in the form of a multistage process according to the EU model.

The above-cited rules regarding the Maastricht deficit, debt ceiling, spending freeze and debt ratio adjustment increasingly complicate a conventional implementation of large infrastructure projects. Therefore, the provisions of the 2012 Austrian Stability Pact (ÖStP 2012) have a decisive influence on the Viennese decision to realize e.g. larger schools in the form of public-private partnerships (PPP).

The city of Vienna has a strong population growth (about 30,000 additional inhabitants per year). This development requires among other enhanced infrastructure investments of Vienna, especially in the areas of housing, education and health. Due to the above-cited restrictions of the Austrian Stability Pact in 2012, PPP projects are increasingly being viewed as an alternative to conventional procurement. Despite the relatively high liquidity, it is becoming increasingly difficult, only resorting to conventional procurement methods for the city of Vienna due to the aforementioned conditions. Therefore, for the city of Vienna PPP comes into consideration as an additional procurement method. Important factors include aspects such as a well-coordinated project organization, compliance with the provisions of public procurement law as well as the ESA 2010-compliant design of the individual projects.

However, the experience of the city of Vienna with PPP projects remains relatively new. At present, ten school campuses have been projected. Furthermore, there are PPP projects by the Vienna Hospital Association.

Given the circumstances, the city of Vienna has the task to reconcile the provisions made by the 2012 Austrian Stability on the one hand and the need for additional infrastructure investment on the other. This objective can only succeed under the given conditions with a sustained implementation of structural measures. The city of Vienna has thus decided several months ago to implement a sustained structural reform. The focus of this structural reform is savings and reduced expenditure. There is no alternative to a structural reform because there is no visible sign at the EU level that infrastructure investments will be excluded from the provisions of the stability programs.

Chapter 1: The EU fiscal rules as an obstacle for municipal services and investments


Privatizations endangering public investments – a municipal perspective

The impact of the economic crisis

The economic crisis has left deep scars on Europe’s national economies. Savings and austerity packages have worsened the situation, while public debt – as a percentage of GDP – has risen further, especially in the countries of the South. In the current debate, the call for state intervention by investing in infrastructure (the Juncker Plan) is becoming louder. In this context, the municipal level has a special role to play. As a growing city, Vienna is facing the challenge of having to provide the required additional infrastructure. Investments in infrastructure are indispensable to secure its attractiveness for business investments and the quality of living. A good competitive position at the international level is the economic basis for maintaining a high level of prosperity. This is why now in particular, funding is needed for investments in this city, so we can continue providing services at the usual standard of quality and scope for all of Vienna’s inhabitants.

Investments and privatizations

Investments create value. Gabler’s Economic Dictionary defines investment as “binding financial means in tangible and non-tangible assets for the long term”. This definition is important as it clearly spells out the fact that investment costs are never “lost”, but merely converted into assets. For instance, if the city of Vienna builds a kindergarten, it ends up with less money (or higher financial liabilities) but with a kindergarten that has a tangible value (the building). Investments ultimately constitute an asset swap but do not change your financial position.

Time and again, we have heard that indebted states (such as Greece) should privatize their assets and use the proceeds to pay off their debt. When some countries found it increasingly difficult to fund themselves at reasonable rates on the capital markets from 2010 onwards, the sale of publicly-owned assets fur funding purposes was discussed. Austria, has also seen a number of privatizations in the past, including BUWOG – the state-owned housing developer – and the national telecom operator Telekom Austria

However, what does the privatization of public property mean? Investments of the past are – as it were – reversed. With privatizations, the sole focus is on the one-time proceeds, which neither make the state richer (asset swap, see above) nor reduce the Maastricht deficit. It is simply the liquidity of public households that increases, as equity capital that is tied for the long term is (re)converted into short-term current assets. To make things clear, the state’s financial position does not change: while it may

Klemens HIMPELE 44

Chapter 1: Privatizations endangering public investments – a municipal perspective

have less financial liabilities, it will no longer have a kindergarten either, and no Telekom and thus no access to the profits that it generates either. In general, arguments such as democratic involvement, market dominance, social aspects or security of supply all speak against privatizations. Instead, one should focus on the potentials of raising efficiency and effectiveness in public sector enterprises.1

Public service provision - A key task for municipalities

Public service provision includes all services on which citizens critically depend in their day-to-day lives. Public service provision covers a wide spectrum of services, from water supply, waste disposal, health care, public short-haul transport and education to culture and sports facilities. To ensure a well-functioning basic supply, all citizens must be able to access all services. The ultimate goal should not be profit, but rather security of supply and a sense of responsibility vis-à-vis the citizens. The services should be sustainable and of high quality. Moreover, existing resources should be used sparingly. The debate about whether public service provision should be organized by the state or private sector companies has been ongoing for decades. In the negotiations at the European level, Vienna has been strongly in favour of maintaining a “freedom of economic choice”. This means that a municipal or local authority may decide for itself whether it will provide public services itself or through private sector companies. Vienna has deliberately opted to provide public services out of its own effort, i.e. publicly and/or by its own municipal undertakings. What society needs should not be governed by the principle of competition.2 On this point, Vienna’s politicians concur with the citizens: in a referendum held in March 2013, 87.2 % of the city’s residents (with a turnout of 38.7 %) were in favour of protecting public services and enterprises from being privatized.

For the seventh consecutive time, Mercer has ranked Vienna as having the highest quality of living among 230 cities worldwide. This remarkable achievement of being ranked top yet again in the Quality of Living Survey 2016 is also attributable to the public organization of public service provision. Alongside a qualified workforce, productivity and internationality, quality of living is a key to the competitiveness of a region.

Examples of failed privatizations

Many economic policy debates in recent years have revolved around the argument that companies that are organized along private sector lines are more efficient than their public sector counterparts. This has been refuted many times and will be illustrated in the following by a handful of examples from Central and Eastern Europe, which were researched by Eurocomm-PR.

1 cf. Feigl Georg 2013: Effektive öffentliche Unternehmen statt Privatisierungen. In: Perspektiven, Nummer 7_8. 43.

2 cf. Mathé, Breiner 2013: Daseinsvorsorge – Garant für hohe Lebensqualität. In: Perspektiven, Nummer 7_8. 40 f.



Following a partial privatization of water utilities, the water rates tripled between 1997 and 2012 to an equivalent of EUR 0.79 /m³. Major investments were not carried out. After a buyback in 2012, the city must now make up on the investments that were neglected in the past. The water rates have since been lowered again. Ever since a majority stake of the Budapest power utility ELMŰ was privatized in 1995, the price of electricity increased by 30 % and 32 % in the first and second years. According to a survey conducted by the Hungarian energy regulator in 2001, the number of power cuts increased after privatization compared to before the privatization. The owners invested in reliability and service quality, although this led to yet another price hike for private households. In 2013, the price was at around EUR 0.15/kWh. This corresponded to the Vienna price level, while the average income in Budapest was 2.5 times lower. A price cut was then agreed with the state, as the high price level meant an enormous burden for the users.


In 2001, the Prague water and waste-water utility was transferred to the French Veolia utility by way of concession until 2022. The maintenance investments for upgrading and expanding the water and sewage system amount to EUR 78 million annually. Veolia does not invest directly, but rather pays a concession fee to the municipal undertaking PVS, which is then responsible for the investments. This gives the city control over the investment activities in the area of water and sewage. However, rates doubled in 2016. Owing to the concession, Prague has forfeited its right to EU funding for the rehabilitation and modernisation of the main sewage plant in Prague. Prague would be entitled to over EUR 200 million of European Union grants if the city had a stake in the utility company. Legally, a rescission of the concession agreement is without prospect. Therefore, the project can only be funded from the concession fee and continuouslyrising user charges.


Sofia also transferred its water and sewage networks and facilities to the British International Water utility through a 25-year concession in 2000, which in turn sold its shares to United Utility, another British utility. Some years later, United Utility sold to the French Veolia. The British companies showed financial weaknesses and disputes arose with the city concerning a raise of water and sewage fees. Veolia holds 77.1 % of the shares of the utility company, while the remainder is in the hands of the city. Sofia would like to terminate the concession agreement, although this would cost the city several hundred million euro in terms of repayments and penalties. In the past sixteen years, the water and sewage fees have risen almost fourfold.

Klemens HIMPELE 46

Public investments in the quality of living

Regular investments are needed to ensure the high quality of public services. Vienna not only wants to remain the city with the highest quality of living, but also to step up its public service provision, which is why it will continue to invest in the future.

Over the past fifteen years, Vienna has grown by 300,000 inhabitants. According to current forecasts, the city will have reached two million inhabitants by 2030. Investments in its infrastructure are indispensable to secure its attractiveness for business investments and the quality of living. A good competitive standing at the international level is the economic basis for being able to maintain a high level of prosperity.

This is why funds for investments in the city are needed now, so that we can continue providing services at the usual standard of quality and scope for all of Vienna’s inhabitants.

What is more: investments create jobs! Especially during a crisis, public budgets must be used for investments to counteract the downward spiral of the economy. This is precisely what Vienna has done: it did not respond to the crisis-induced decline of revenues by cutting investments, but rather by entering into new debts with a clear purpose and a sense of proportion. This is what works!

Through their investments in Vienna’s energy supply and the public transport network alone, Wiener Stadtwerke is securing 13,600 jobs annually on average. These investments are used to employ people in the companies that work on the new construction projects and the development of Vienna’s infrastructure. Accordingly, they benefit the local economy as a whole, not only the public sector employees. For instance, when the underground line U2 was extended to Aspern, every billion euro invested translated into a capacity utilisation of 17,000 employee years (full-time jobs), of which Vienna accounted for approximately 59 % or 10,000 full-time jobs3

In general, every EUR 1 billion in terms of additional public investments triggers employment effects to the order of 6,000 to 10,000 additional jobs, according to Markus Marterbauer4. By comparison, a corresponding reduction of income tax generates a mere 2,000 to 5,000 jobs.

“Golden Rule”

As far as investments are concerned, European austerity policies have significantly aggravated the crisis and accelerated the decline in employment in the short term. At the same time, they have curtailed the economy’s long-term development potential. If the necessary investments in infra-

3 cf. Reinhard Haller, TU Wien; Gerhard Streicher, Joanneum Research; Oliver Fritz, WIFO: Beschäftigungs- und regionalwirtschaftliche Effekte der U2-Verlängerung Schottenring – Seestadt Aspern in der Bauphase, Vienna, December 2011, p. 5 and p. 7.

4 Marterbauer et al. 2006: Wirtschaft und Gesellschaft, 36. Jahrgang (2010), Heft 3, p. 315.

Chapter 1: Privatizations endangering
investments – a municipal perspective

structure are lacking – from public transport to energy, environmental protection and housing – the general framework of economic activity is bound to be negatively affected.

Economically, this is unacceptable. As described, investments are nothing more than an asset swap. This is why there have been calls for some time to exempt investments from the rules governing public debt. By the way, this was prevailing law in Germany for a long time and would give the member states leeway to make investments that are beneficial for the overall economy to promote employment and thereby strengthen the potential for long-term economic development without neglecting the fundamental goals of the European Fiscal Pact.

For these reasons, this “Golden Rule” is met with increasing acceptance. It is high time to finally end austerity and use fiscal policies in a meaningful manner, since investments create jobs, infrastructure for the future and values for generations to come.


Chapter 1: Public procurement: challenges for public undertakings



procurement: challenges for public undertakings



purpose and criticism of EU procurement rules

Public procurement refers to the purchase by governments and stateowned enterprises of goods, services and works.1 The European Union –mainly driven by the European Commission – has identified public procurement as a considerable non-tariff barrier and a hindering factor for the functioning of a genuinely competitive internal market.2 Against the background of the European Union’s goal to create a single market, which requires the removal of barriers in governments and markets, public procurement has been regulated at the European level by Community rules over recent decades.

The EU’s internal market policy realising the regulation of public procurement is mainly based on two pillars: (1) the Treaty on the Functioning of the European Union (TFEU) and (2) the procurement directives3 4 The TFEU constitutes primary law and contains – among others – directly enforceable general rules and principles prohibiting EU member states from discriminating against each other, which are applicable to all public procurement measures and all types of government contracts. Nevertheless, since TFEU principles alone have proven insufficient to open up member states’ procurement markets, harmonising secondary legislation was needed.

The European Union’s effort to achieve transparent public procurement regulations for contracts and ensure its effective enforcement at the EU level dates back to the 1970s. The first directives5 addressing public works and supplies contracts introduced the above-mentioned principles, i.e. contracts have to be advertised community-wide, discriminatory technical

1 (29.07.2017).

2 Christopher H. Bovis, The EU and public procurement law (2015), (29.07.2017).

3 A directive is a form of legislation which requires each Member State to ensure that it has appropriate laws in its own legal system to implement the rules of the directive.

4 Sue Arrowsmith, The EU Procurement Regime – Objective and Overview (Chapter 2), in Arrowsmith (Ed), EU Public Procurement Law: An Introduction (2010) 44 (52f), asialinkmaterials/eupublicprocurementlawintroduction.pdf (29.07.2017).

5 Directive 71/305/EEC concerning the coordination of procedures for the award of public works contracts; Directive 77/62/EEC coordinating procedures for the award of public supply contracts.


specifications are prohibited and tendering and award procedures must be based on objective criteria.

As a result of reforms in the late-1980s, negotiated procedures were replaced by open tendering procedures, i.e. purchasing authorities have to publish advance notices of their annual procurement programmes as well as details of each award decision.

In the following regulation period, award procedures were amended due to the EU’s membership to the WTO Agreement on Government Procurement (GPA). Under the GPA, the EU and its member states provide access to the EU procurement market to certain third countries, while those countries in turn undertake similar obligations vice versa. However, the GPA does not govern the relationship of the EU member states inter se

The single market is a very abstract construction and it is increasingly difficult to make the European Union citizens believe in this abstract thing called the single market. Moreover, it is more important to view public procurement as a tool for handling tax money carefully, but also not more than a tool.

The European regime forcing competitive, fair and transparent public procurement across the EU’s single market can be advantageous in terms of business development, economic growth and efficiency. However, reality has shown us that there are also sectors losing due to the very rigid public procurement rules, whereby especially small and medium-sized (SME) companies can hardly cope with all of the formal requirements and they are often no longer part of the procurement market. The other major constraint of public procurement lies in the focus on efficiency, namely money savings in the short term. It is nowadays very obvious that especially investments in long-term infrastructure must be seen differently. In this case, it is all about effectivity, meaning getting the best out of the invested money.

In 2014, a package of three new public procurement directives6 was adopted. The new directives represent a far-reaching reform of the regime by shifting to full e-procurement, introducing new procedures and focusing on strategic use of the procurement rules. Above all, contracting authorities should benefit from running procurement exercises faster, with less red tape and a better outcome, i.e. getting the right supplier and the best tender.7

Even though – as mentioned – the EU’s internal market policy is advantageous in several fields, the growing regulation of public procurement law at the EU level requires a critical reflection, particularly with respect to cost-benefit analysis. Spending tax money on excessively regulated – and thus complex – tendering procedure misses the actual objective of creating economic welfare by developing a single market. Especially

6 Directive 2014/24/EU on public procurement; Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors; Directive 2014/23/EU on the award of concession contracts.

7 Johannes Stalzer, EU: New Public Procurement Directives adopted (2014), (29.07.2017).


Chapter 1: Public procurement: challenges for public undertakings

from the SME perspective, obligatory tendering policy entails disadvantages, which is reflected in the declining number of market participants.

The in-house exception and the inconsistent obligatory tendering in case of public transport

Within the framework of public procurement regulation, municipalities have been granted certain essential privileges. Maintaining these privileges, breathing even more life into the discretionary power of municipalities is one aspect of particular importance to guarantee efficient expenditure of public funds.

The following section deals with so-called “in-house” tendering, which constitutes – besides public-public cooperation – one of the significant privileges strengthening municipalities’ discretionary power.

If a contracting authority chooses to use its own administrative, technical and other resources, it is not obliged to call on outside entities not forming part of its own departments or on economic operators. In these cases, there is definitely no need to apply the Community rules in the field of public procurement, as there are no public service contracts involved that are subject to the compulsory tender procedure.8

It is noteworthy that the Community rules do not include definite legal constraints accounting for the case that the contracting authority performs through an entity that is legally separate, despite being founded and owned by the contracting authority itself.

Clarification can be derived from case law of the Court of Justice from the European Union (CJEU). According to the CJEU’s decisions, a legal entity established by a contracting authority may be regarded – under specific circumstances – as being equivalent to an internal department of that contracting authority. In this case, an arrangement even between two legally distinct entities may fall outside the scope of application of the directives.

Further conditions that a company set up by the contracting authority has to fulfil to fall under the in-house exception have been first defined by the CJEU in the Teckal judgement9 10 The most important requirement is that the contracting authority must be able to exercise control over its contractual partner as it would have over its own departments.

In the case of public service concessions, most directives11 themselves do not apply. Nonetheless, EU primary law as well as the principles of

8 Annemarie Mille, Exception to the Public Procurement Directives: “In-house” Transaction, in G. Gruber, T. Gruber, A. Mille, M. Sachs (Eds), Public Procurement in the European Union (2009) 363f.

9 Teckal Srl v Comune di Viano and Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia, Case C-107/98.

10 Sigma, In-house Procurement and Public/Public-Co-operation (2016) 3ff, (29.07.2017).

11 For instance: Council Directive 93/42/EEC concerning medical devices.


equal treatment, non-discrimination and transparency preclude a public authority from direct awarding.12

In this context, the in-house exception has exhaustively been debated on the issue of inconsistent obligatory tendering in the sector of public transport, which is regulated through concession as opposed to public contracts. These concessions grant a party the right to perform a mode of public transport for a specific route. As mentioned, service concessions fall outside the scope of EU secondary law regulating public procurement. Thus, a competitive tendering procedure that is comparable to the EU procurement regime is needed. Therefore, since 2007 the European Regulation on public passenger transport services by rail and by road (PSO Regulation13) provides guidance in terms of how decentralised governments ensure the quantity, quality and safety of public transport for a reasonable price. As an implication, public service contracts can only be awarded based on an open, transparent, fair and non-discriminatory Unionwide award procedure. The call for tender must be published in the Official Journal of the European Union.

It warrants mentioning that there have been controversial positions in terms of regulating obligatory tendering in the transport sector. Especially large cities insisted on their freedom of choice. Ultimately, the PSO regulation clarified that local governments are still allowed to apply the in-house exception to national public procurement rules. Nevertheless, there are some limitations; for instance, in the “heavy rail” sector contract duration cannot be longer than ten years.

The example of the Netherlands shows how major cities manage to keep a broad discretionary power while deciding upon public service delivery. Dutch legislature prevents local public authorities in the Netherlands from applying the in-house exemption. However, the four major Dutch cities (Amsterdam, the Hague, Utrecht and Rotterdam) have circumvented the obligation to follow a competitive procedure through an amendment.14

Unambiguously, results of a study in Germany15 – which is mainly dominated by a competition regime – illustrate the benefits of municipalities’ discretionary power in the public transport sector. In this case, in-house procurement can be more advantageous, whereas obligatory tendering comes at the taxpayer’s expense. The macroeconomic importance of track railways is frequently underestimated by public debate since the critical evaluation is usually limited to investment costs without taking into account their (long-term) economic and social effectiveness. The cost burden quoted

12 Mille in Gruber, Gruber, Mille, Sachs (2009) 364.

13 Regulation 1370/2007 on public passenger transport services by rail and by road.

14 Willem Andries Janssen, Public Procurement Law and In-House Delivery of Public Services: Improving a Paradox, in A. McCann, A.E. van Rooij, A. Hallo de Wolf & A.R. Neerhof (Eds), When Private Actors Contribute to Public Interests: A Law and Governance Perspective (2014) 7-26.

15 Friedrich Klug, Einleitung für den “eiligen Leser”, in Friedrich Klug, Hansjörg Gernolt Pauritsch (Eds), Vergabe von Eisenbahnverkehrsleistungen in der EU (2016) 6ff.


Chapter 1: Public procurement: challenges for public undertakings

by local and regional authorities in Germany seems to be set too low because affiliated companies try hard to put qualitative improvements achieved into perspective. However, this is a dearly-bought advantage. In truth, hidden costs arise from the elaborate process of tendering, transaction and monitoring. Taking into account those “hidden” costs, the total costs in Germany are 72% above the current costs in Austria.16 As a result, the example of Germany shows that in the long run competition can be costly, at the expenses of the community and other third parties.

Further advancement: “public/public” – exception

The (horizontal) cooperation between two or more municipalities constitutes a proven organisation model of rendering public services, i.e. a contracting authority provides services for others, they provide services together or found and empower a legal entity to perform a public task. Successful public/public cooperation can reduce costs as well as improve quality and quantity.

In recent years, public/public cooperation has gained momentum due to increasing financial straits, (location) competition and requirements of service recipients. Public/public cooperation has become one of the most important action approaches for regional-level reforms.

The new framework conditions entail new exceptions of the public procurement regime, namely obligatory tendering. As mentioned, the in-house exception – codified by the procurement directives and their national implementation, also clarified by case law of the CJEU – is the most significant privilege of municipalities.

Against this background, the CJEU has extended the application field of the in-house exception to public/public cooperation. As a result, new procurement directives and national implementation have followed. The Austrian Higher Administrative Court decided – even before national implementation took place – that Austria applies the public/public exception.17 This decision emphasises the importance of the new exemption as well as the necessity of its analysis.

In its judgement in the ASEMFO case18 in 2007, the CJEU held that the ability to exercise effective control – which the court determined as a requirement to benefit from the in-house exception – can also be fulfilled in case of joint control.

Is it noteworthy that only when a municipality makes arrangements with private companies that are legally distinct are the public procurement directives applicable.

By contrast, if contracting authorities choose to carry out their general interest tasks jointly, they neither have to apply Community rules nor have to follow compulsory tendering procedure. The broad scope of the exemption

16 Klug in Klug, Pauritsch (2016) 8.

17 Higher Administrative Court, 17 June 2014, 2013/04/0020, Korneuburg.

18 Asociación Nacional de Empresas Forestales (Asemfo) v Transformación Agraria SA (Tragsa) and Administración del Estado, Case C-295/05.


of public/public cooperation significantly limits the obligation of proper tendering.

Nevertheless, the detailed examination of requirements remains essential and necessary. A contracting authority that does not fulfil the exemption requirements is obliged to follow compulsory tendering procedure. The violation of the tendering obligation provokes nullity of the contract, as well as the imposition of a fine.

Freedom of choice and its value

When a contracting authority needs specific supplies, services or works, it faces the choice between externalisation and producing internally. The Public Sector Directive19 clearly states that a contracting authority is free to choose the way in which it prefers to proceed and is not obligated to follow the externalisation route. The intention behind the idea of “having the freedom to choose” is the granting of contracting authority’s liberty to determine which solution best achieves the set objective in the public interest and best ensures the efficient expenditure of public funds.20

As already mentioned, the internal performance alternatives are legal exceptions of the European public procurement regime and thus they are exempted from a duty to tender, which can be compulsory without such an exception. European law and the CJEU’s jurisprudence facilitate this freedom of choice in favour of the internalisation of service delivery.

Nonetheless, as the internal performance of services – especially the public-public collaboration – has gained importance in recent times21, municipalities complain about the narrowing interpretation of the legal exemptions, thus feeling pushed into externalisation by excessive EU regulation. The greater the pressure, the more that authorities insist on keeping their freedom of choice regarding in-house exception, likewise service concessions and semi-public companies. In order to secure the best performance of public services, contract authorities must find the right balance between hesitation and giving in to the pressure to externalise.

Regarding the issue of forcing externalisation, a distinction must be drawn: on the one hand, concerning economic sectors that do not entail significant infrastructural measures – for instance, daily goods – it is necessary that governmental bodies view competition as an opportunity and not a constraint. This can only be achieved by promoting and pursuing pro-competition and pro-efficiency models.22 Consequently, policies must reward those authorities engaging in opening up markets by becoming active market players and in turn promoting competition themselves. As a

19 Directive 2014/24/EU on public procurement and repealing Directive 2004/18/EC.

20 Sigma, In-house Procurement and Public/Public-Co-operation (2016) 1.

21 Willem Andries Janssen, Public Procurement Law and In-House Delivery of Public Services: Improving a Paradox (2014) 12.

22 Luigi Fiorentino, Public Procurement and Competition (2006), IPPC2/PROCEEDINGS/Article_34_Florentino.pdf (29.07.2017).


Chapter 1: Public procurement: challenges for public undertakings

prerequisite, authorities shall introduce parameters such as strategic decision-making. Once authorities feel competent to compete, the freedom to choose will automatically shift from internalisation to externalisation.

However, on the other hand, as the aforementioned example of public transport sector illustrates, disadvantages of competition and obligatory tendering exist regarding long-term investments, namely large-scale infrastructure projects.

Furthermore, in the case of traditional public finance, the so-called Golden Rule has to be considered. The Golden Rule states that net public investment should be financed by debt: in other words, excluded from balanced-budget rules. Such an exemption can help to protect public investment in times of austerity as cuts in public investment subsequently cannot be used to reach a specified consolidation target. However, the main argument in favour of a Golden Rule for public investment is that in the long run debt-financing ensures that future generations not only benefit from past investment in public buildings, rail- and motorways and so forth, but also contribute to the costs of these goods and amenities. Indeed, a Golden Rule has particular advantages by providing a direct boost to public investment at the national level.23

In conclusion, public procurement should no longer be seen from the purely legal standpoint but rather from an economic perspective based on leaner process regulation to achieve efficiency. Ultimately, the community benefits if micro and macro management efforts are combined.

23 Georg Feigl, Achim Truger, The Golden Rule of Public Investment Protecting fiscal leeway and public infrastructure in the EU, ETUI Policy Brief, European Economic, Employment and Social Policy 2015/12 2f.


Risks and advantages of public-private partnerships (PPPs)

Cooperation between public authorities and private enterprises is not new: such examples also existed before the emergence of the concept of public-private partnerships (PPPs). The city of Vienna is facing a number of challenges associated with PPPs: on the one hand, due to the high population growth rate of approximately 30,000 people per year, increased infrastructure investments have become necessary in the areas of housing, education and health; and on the other hand, PPP has become a form of procurement due to the requirements of the Austrian Stability Pact 2012 (ÖStP 2012) and the European System of National and Regional Accounts 2010 (ESA 2010).

a) Definition of PPPs according to ESA 2010

ESA 2010 was implemented in September 2014 and defines PPPs as follows:

“Public-private partnerships (PPPs) are long-term contracts between two units, whereby one unit acquires or builds an asset or set of assets, operates it for a period and then hands the asset over to a second unit. Such arrangements are usually between a private enterprise and government but other combinations are possible, with a public corporation as either party or a private NPI as the second party.

Governments engage in PPPs for a variety of reasons, such as the hope that private managements will lead to more efficient production and that access to a broader range of financial sources can be obtained and the wish to reduce government debt.

In the contract period the PPP contractor has the legal ownership. Once the contract period is over, the government has both economic and legal ownership.”

In practice, mainly two features in this definition seem to be important: first, the different motivations cited for PPP; and second, the attribution of the economic ownership to either the private partner or the public authority/ government unit is relevant for assessment in accordance with ESA 2010.

b) Characteristics of PPPs according to ESA 2010

PPPs are complex, long-term contracts between two units, one of which is normally a corporation (or a group of corporations, private or public), called the operator or partner, while the other is normally a government unit, called the grantor. PPPs involve a significant capital expenditure to create or renovate fixed assets by the corporation, which then operates and manages the assets to produce and deliver services to either the


Chapter 1: Risks and advantages of public-private partnerships (PPPs)

government unit or the general public on behalf of the public unit. At the end of the contract, the grantor usually acquires legal ownership of the fixed assets. In most cases, the fixed assets are characteristic of some core public service such as schools or universities hospitals, and prisons. They may also be infrastructure assets because many of the large projects undertaken by means of PPPs involve the provision of transportation, communications, utilities or other services typically described as infrastructure services.

There are three main categories of risks, namely construction risk, availability risk and demand risk.

▪ Construction risk: risk bearing of costs by late delivery, non-compliance with prescribed standards, legal and environmental issues, technical problems, etc. Construction risk is considered as being transferred to the private partner if any additional costs such as delays in delivery, non-compliance with prescribed standards, legal and environmental issues, technical defects or other negative externalities are borne by the private partner, with very few exceptions. Construction risk includes the building risk (geological characteristics and archaeological finds), the environmental risk (risk of contamination) or the risk of incorrect implementation of the planning.

▪ Availability risk: remuneration is shortened when there is poor performance. Penalties are designed in a way that the private partner suffers a significant economic disadvantage. If the asset is completely unavailable, the remuneration should be zero. This risk category comprises mainly the scope and quality of services of the current maintenance and repairs of the persons entrusted with tasks of facility management. In the facility management agreement, the contracting authority may specify the quality, quantity and performance standards of the services required in so-called “service level agreements”. These service level agreements should eliminate disputes regarding the due performance and establish a system of sanctions. Clear provisions on mutual obligations between the government unit and the facility manager are indispensable. The consequences of breach of contract and the remuneration obligations and regulations in power changes must be committed. Availability risk is considered as being transferred to the private partner when the compensation in the event of poor performance can be significantly reduced, deductions of compensations engage automatically and are sufficiently high that the private partner suffers a significant economic disadvantage. If the asset is completely unavailable, the remuneration for the relevant period should be zero. Availability risk includes – for example – maintenance and servicing risk (the risk that the maintenance and repair costs are higher than forecast), operating risk (risk of power disruptions) or obsolescence risk (risk of obsolescence of technical equipment and appliances).

▪ Demand risk: The remuneration depends directly on the end user behaviour and can be influenced by the private partner. The share of demand-based compensation is commercially essential. Typically (as in PPP projects in education), the demand risk remains with the grantor/ the government unit. The demand risk is only considered as being


transferred to the private partner when the remuneration depends directly on the behaviour of the end user and the private partner has the opportunity to respond to a change in the behaviour of end customers through advertising, new usage, etc. Moreover, it must be considered whether the proportion of demand-dependent compensation is commercially essential. The risk of demographic changes is an example of demand risk.

Construction risk and at least one other risk (usually availability risk) must be transferred to the private partner. Furthermore, there must not be a back transfer of risks to the public sector through the acquisition of financing, guarantees (for example, by offsetting and waiver, in connection with a forfaiting) or early termination.

Public-private partnership projects with a total investment of 10 million Euros and more are to be reported to the Statistics Austria.

c) Advantages and disadvantages of PPPs

PPP models have a number of advantages and disadvantages, which are briefly outlined below:

Advantages: One frequently-mentioned benefit is the responsibility for an object over the entire object lifecycle, connected with a stronger uplift of efficiency and optimization potential when compared to a conventional procurement. Another advantage comprises using an appropriate risk distribution between government unit and the private partner regarding their respective core competencies. An ESA 2010-compliant approach associated with deficit and debt-sparing and long-term budgetary planning security are also important arguments for procurement via PPPs. Compared to other alternative financings such as operating leases, PPPs also normally provide a guarantee that the government unit has (at least after the end of the contract period) legal ownership of the asset.

Disadvantages: one disadvantage of PPPs is certainly the long-term commitment to a private partner and consequently the potential danger of “tweaking” at the expense of the quality of performance. The complexity of the contract structures can also be cited as a further disadvantage. The higher advisory, transaction and financing costs (financing costs of the private partner are usually higher than those of the public sector) as well as the long-term commitment of budget funds is a further disadvantage. With a realization of several PPP projects within a rather short timeframe, very high fixed costs are to be expected (postponement of deficits and debt in the future) by the government unit.


Chapter 1: Alternative financing with citizen participation and crowdfunding

Alternative financing with citizen participation and crowdfunding

This article is an abstract of the “Guideline on Public-Private Partnership (PPP)”1, which was elaborated during a BACID Mentoring with the Capital City of Podgorica, Montenegro in the period of June to November 2015. The purpose of the mentoring was to support the diversification of PPP practices in Podgorica and Montenegro, simultaneously offering inputs for necessary improvements of the legal framework. The full guideline covers the PPP models “Operator”, “Contracting”, “Leasing”, “Property Development” and “Alternative Financing Models”. This article focuses on the alternative models.

1 Citizens’ credit and loans

The granting of loans to local governments by citizens (citizens’ loans/ citizens’ credit) represents a relatively new financing model in which cities or municipalities receive funding through (quasi-) direct contributions by their citizens. A crucial element is the involvement of an intermediary (a trust bank, for example), which under the banking act is entitled to make credit transactions (“banking subject to approval”).

As a rule, the basic transaction is a loan granted to the city through the intermediary as soon as all deposits (declarations of consent by the citizens to grant credit in an appropriate amount) have been collected. Repayment is made either at maturity or monthly, depending on the model. The interest rate of the practical examples to date have fluctuated from 0.76 to 3.6 percent.

The following examples successfully illustrate implemented citizens’ credit projects.

1 Public Private Partnership: Guideline based on the experiences of the Austrian municipalities; Vienna 2015, Published by Thomas Prorok with contributions from Claudia Raicher, Clemens Hödl, Wolfgang Oberascher


Table 1: Citizens’ credit case examples

Quickborn citizens’ credit Willich – Construction of a new cafeteria for two schools

Year 2010


Intermediary (biw AG bank “Heimatinvest”) collects contributions and grants loans; two loan models

1st instalment – until Feb 2011 2nd instalment – until July 2011

Intermediary (biw AG bank “Heimatinvest”) collects contributions and grants loans; two loan models

Minimum contribution 5,000 euro 5,000 euro, in increments of 1,000 euro thereafter

Runtime 2 years/5 years (maturity) 20 years (monthly repayments of interest and principal)

Interest rate 1.5%/2.6% p.a.

Total volume 2 mil. euro (1 mil. for each model)

3.6% p.a.

1st instalment – ca. 500,000 euro

2nd instalment – ca. 1.2 mil. euro

Source: own presentation based on Stötzer, S., Ellmer, M. 2013, KDZ 2015

2 Crowdfunding-based citizens’ credit models

Crowdfunding can essentially be defined as “an instrument of procurement marketing in which the crowd principle, in the financial sense, is used to achieve a concrete financial goal within a specific time period for clearly delineated, predefined projects publicized via Web 2.0 instruments (esp. social media, platforms).”2

The key differences from the citizens’ loans discussed in the previous chapter are as follows:

▪ Crowdfunding-based citizens’ credit models relate to actual projects and are not granted to a city or community in a “generalized” manner;

▪ As a rule, these are smaller, individualised, self-contained projects;

▪ Although a trust bank is also required for this model, usually a specialised crowdfunding platform (such as a Web 2.0 platform) is used as a second intermediary;

▪ Unless otherwise specified by the borrower (i.e. the city or municipality), the minimum amount is comparatively small (e.g. 100 euro in reference projects) and hence it is a system for granting micro-loans;

▪ The interest terms under which money is lent to the city or municipality are essentially up to the lender (as a rule, however, upper limits to the interest are set), whereby the total interest rate is calculated from the weighted mean of the interest on the credit funds.3

2 Hainzer, M., Stötzer, S., Ellmer, M., Crowdfunding-basierte Bürgerkreditmodelle in Kommunen

3 Also see 2015


Chapter 1: Alternative financing with citizen participation and crowdfunding

These models essentially work the same way as citizens’ loans.

Figure 1: How crowdfunding-based citizens’ loans work

Project initiators Citizens (crowd)

Goal Implementation of a non-profit project

“reward” Political promotion through successful implementation

Role/function in the project

Specification of the framework conditions and carrying out the project

Implementation of a nonprofit project

Interest on the financial contribution

Platform Trust bank

Support for the project

Share of the money acquired (business goal of the company)

Investor Provision of the platform Specialises in arranging loans to communities and municipal companies by citizens

Support for the project

Share of the money acquired (business goal of the company)

Ensures that the investment is used in a legal manner

Accompanying the process from the in-payment by the investor to the disbursement to the community

Case example OestrichWinkel

City of Oestrich-Winkel

Citizens of the city and others LDSG GmbH (Leihdeinerstadtgeld)

Source: Own presentation based on Hainzer/Stötzer/Ellmer, 2014

Fidor Bank AG

The German city of Oestrich-Winkel is a case example of crowdfundingbased citizens’ credit (CfbB). The plan was to buy new radio equipment for the volunteer fire company, with investment costs of ca. 160,000 euro. The city opted for partial financing through CfbB to the amount of ca. 83,000 euro. The planning phase for the project took around one year.

The chosen platform was the company “LeihDeinerStadtGeld” [“LendYourCityMoney”], which specialises in municipal crowdfunding. They took over the implementation and public relations work of the crowdfunding and ultimately issued prorated loan claims (with the legal backing of Fidor Bank AG) against the city of Oestrich-Winkel.

The model was based on the following conditions: the term of the loan was six years, repayment was over a period of six years, in equal instalments and at a maximum interest rate of 0.76%. A six-week subscription period was set and the target amount was reached after five weeks. In this particular case, the amount was provided by a total of thirteen citizens.4

4 Hainzer, M., Stötzer, S., Ellmer, M., Crowdfunding-basierte Bürgerkreditmodelle in Kommunen


Opportunities and risks of citizens’ credit models

Both of these models are legitimate financing options for cities and municipalities. The key opportunities can be summarised as follows:

▪ Citizens’ loans represent a supplementary source of financing for cities and municipalities. Citizens are tapped as a de facto direct investor group. Especially in times when there is an increasing withdrawal of standard investors from the community market, this is an added value not to be underestimated.

▪ The crowdfunding-based variant in particular has a low interest rate (ca. 0.76%), which is generally more favourable for the city or municipality than standard bank loans. Hence, subsequent savings resulting from citizen participation can have positive effects on the municipal budget. In the example project, it emerged that citizens are willing to accept a somewhat lower interest rate for “their” city.

▪ Independence is achieved in the project implementation in that investments can be made that could not have been made without citizen participation.

▪ In addition, citizen participation is strengthened, whereby citizens become directly involved in the municipal government process. On the other hand, the following points of criticism and risks have come to light:

▪ Lower interest rates for the lenders have sometimes been criticised by consumer protection organisations.

▪ Implementation sometimes involves complex legal questions (intermediary bank, platform provider).

▪ The effort and expense for planning and preparation must not be underestimated, while the same applies for the effort and expense for the successful promotion of the measure to the public.

▪ Some resistance by local banks, criticism from the opposition.

▪ Financing is often from a very small circle of lenders (thirteen citizens for the financing of the radio equipment, ca. 80 citizens for the financing of the first Quickborn citizens’ loan), which has a decisive influence on a municipal project.


Chapter 1: Alternative financing with citizen participation and crowdfunding

Table 2: Pros and cons of the “citizens’ loan” & crowdfunding Suitability

▪ “Standard citizens’ loans” for higher financing volumes, even without any relation to an actual project (500,000 euro – 4 mil. euro implemented in previous projects)

▪ Crowdfunding-based models for smaller, direct project financings (ca. 80,000 euro in previous projects), selective use for selected initiatives, but also deemed suitable for higher amounts of funding

▪ Citizens’ loans/credit as a supplement to standard financing, whereby deficit can be financed “conservatively” by bank loans

Pros Cons

▪ Lower interest with CfbB than with standard loans

▪ Opening of a new refinancing channel, addressing a new and younger public (including “small investors” of 100 euro or more) via Web 2.0

▪ Projects that otherwise would not be implemented can be carried out

▪ Citizens become project spokespersons, through “word-of-mouth” propaganda

▪ Little participation in some cases

▪ Planning and implementation associated with corresponding effort and forward planning

▪ Intensive public relations work and promotion

▪ The greater the number of investors, the more support that is required from intermediaries

Source: Own presentation, KDZ, Vienna 2015

2 Citizen participation models for renewable energy sources

Direct citizen participation models often include the renewable energy sector. Photovoltaic or solar systems are often constructed and operated on the roofs of municipal buildings or private buildings. On a larger scale, entire “people’s power plants” are also built.

Such models can essentially be classified in two different participation forms.

Table 3: Variants of citizen participation structures

Outside creditor Participation

Loan model

“Sale and lease back” model

Profit-participation loan

Bonds and participation certificates


Private corporation

Limited partnership and its special forms

Limited liability company (GmbH)

Silent partnership

Registered corporation

Source: Padevetova 2013, KDZ presentation, Vienna 2015


Loan capital models are structured similarly to loans. The outside creditor lends an agreed amount of funds to the borrower and gets the invested money back in a specific time period, with interest or a profit surcharge. The creditors do not have participating interest in the company, nor do they accept any corresponding liability. As a rule, there is no right of say, although cancellation or selling rights can usually be arranged.5

In shareholding or participating interest models, corporate shares, cooperative shares or bonds are issued, which ensure the private subscribers a participating interest in the company and a share of the profits. In principle, the relationships of shareholders to one another, their rights and obligations (such as the form of profit-sharing, control rights, or the type of liability as well as decision-making and representation of the company) are governed by articles of association.

Table 4: Examples of citizen-owned solar plants in Austria

Municipal works Judenburg AG

Model Sale-andlease-back

Cost for shares or minimum loan amount


Interest rate/ profit/“reward”

Half module 475 euro –whole module: 950 euro

Depending on the life cycle of the plant, ca. 25 years

3.1% of the invested amount

Participating interest in the limited liability company

200 euro participation certificate

Bond and participation certificate

Purchasing and leasing model

2,000 euro 650 euro per module (max. 10 modules)

At least 10 years 20 years Indefinite

After 10 years, 330 euro in the form of purchase coupons (ca. 5.2% interest)

Up to 4% additional credit on their electric bill for shareholders

Investor gets back 80% of the contribution over the runtime plus an annual profit share (ca. 100 euro) corresponding to an interest rate of ca. 2.9%

Fixed interest of 3.125% p.a.

5 Also see Padevetova, K., Bürgerbeteiligungsmodelle für erneuerbare Energie, ihre Vorteile und Nachteile für die Beteiligten

Upper Austria Styria Facility
Vienna Lower Austria
plant ViennaDonaustadt Citizens’
plant Waldviertel
Citizens’ solar plant “Mureck SEBA”

Chapter 1: Alternative financing with citizen participation and crowdfunding

Vienna Lower Austria Upper Austria Styria

Refinancing Shares “Solarmodules” and feed-in

Legally guaranteed feed-in rates for 13 years

Legally guaranteed feed-in rates for 13 years

Source: various online resources6, KDZ presentation, Vienna 2015

Table 5: Pros and Cons of the “Citizens’ Participation Models” Financing Instrument


▪ Essentially suitable as an alternative funding source, but requires precise contractual arrangements

Pros Cons

▪ Availability of a new source of financing

▪ Implementation of projects that otherwise could not be carried out

▪ As a rule, positive publicity for the city or municipality

▪ The legal aspects of investment construction must be checked beforehand; not all models are suitable

▪ Danger of prospectus requirement associated with shareholdings

▪ Direct loan model not in keeping with BWG [Austrian Banking Act]; city/municipality lacks a licence

▪ The power purchase demand risk can lead to insolvency

Source: Own presentation, KDZ, Vienna 2015


See also AK Marktforschung, BürgerInnenbeteiligung bei steirischen Photovoltaikanlagen, 2013 Photovoltaikanlagen.pdf

See also Photovoltaik Austria, Sonnenstrom in Bürgerhand Spezialausgabe, 2012, Buergeranlagen.pdf



The impact of free trade agreements on water services *

It is rare for free trade and investment agreements to be debated publicly. The “TTIP” (Transatlantic Trade and Investment Partnership) the agreement between the EU and the US has been an important recent exception. Offensive commercial interests associated with such agreements also concern water services.

The origins of the controversy date back to the General Agreement on Trade in Services (GATS). This agreement of the World Trade Organization (WTO) came into force in 1995 and aimed at “progressive” – i.e. advancing – liberalisation of the global trade in services. In this case, the term “barrier to trade” is not meant to signify duties, as it does in the conventional sense for goods; rather, the focus of interest is on expanding access to the markets of other WTO members, dismantling non-tariff barriers to trade “behind the border” and exerting pressure on potentially “trade-restricting” regulations. On the one hand, this displays the extent to which obligations to open up the market and open up to competition are entered into (e.g. reducing measures that limit the number of service suppliers, foreign shareholding or allocation of subsidies). On the other hand, regulatory competences in liberalised markets are up for negotiation (e.g. quality requirements and necessary standards for the performance of a concession contract). The expansive scope of this progressive liberalisation agenda gives rise to continued areas of tension: where does such a commercial approach begin and where does it end? In this specific instance, is it a case of legitimate regulations being introduced in the public interest or a mere barrier to trade? Which priority rules and interests prevail in internationally-binding agreements? It is against the backdrop of these areas of tension that conflicts concerning the regulation of public services in GATS and follow-up agreements based on GATS can be understood at present.

Experiences & strategic options concerning the liberalisation of water services

In the GATS negotiations in the early-2000s, the European Commission repeatedly advocated the inclusion of water services. Added to this is the strong interest of the European water industry – such as the largest water companies in the world, Veolia (formerly Vivendi) and Suez – to dismantle “barriers to trade”. Ultimately, the offensive interests of the European Commission to liberalise water services failed in the final stage of the WTO GATS negotiations.

* Abstract from: Argumentarium gegen die Liberalisierung des Wassersektors. Vienna 2014, p. 28-37, Oliver Prausmüller


Chapter 1: The impact of free trade agreements on water services

These offensive interests could potentially take the following directions:

a) Outward-looking liberalisation1 : The direction of thrust of this option is towards an externally-oriented liberalisation strategy that focuses on the access to markets in EU third countries.

b) Top-down liberalisation: A strategy of “top-down” liberalisation can be suitable to promote market-creating and market-deepening measures “from the top” vis-a-vis the national and/or municipal level and evade resistance prevailing there.

c) Lock-in liberalisation: The “lock-in” option aims to safeguard established liberalisations at the municipal, national or European level against a reversal of these measures by means of obligations in international free trade agreements.

New areas of conflict and outlook

In light of the stagnating progress within the WTO, a sharp increase in follow-up negotiations on GATS (“GATS-plus”) can be seen in recent years. The most prominent cases include:

▪ the bilateral negotiations on “TTIP” (officially under negotiation since 2013);

▪ the negotiations on the EU-Canada “CETA” agreement (Comprehensive Economic and Trade Agreement, since 2009;

▪ and plurilaterally, the GATS follow-up negotiations on the services agreement “TiSA” (since 2013), which includes a group of 21 WTO member states besides the EU and the US (the so-called “Really Good Friends of Services”).

As a result, not only have the challenges of water services protection known from experiences of the conflicts surrounding GATS acquired new relevance, but also liberalisation plans and methods are to be promoted that either have hitherto not been enforceable in GATS or have been newly introduced.

The following current areas of conflict also need to be mentioned:

▪ Shift from “positive-list approach” to “negative-list approach”: Instead of the previous standard negotiation approach of “positive lists” within GATS, recent trade negotiations show an increased orientation towards a so-called “negative list” approach. This could lead to severe constraints for the policy space to protect water supply and wastewater disposal services against offensive commercial interests. In the case of a positive-list approach, these services are only included under liberalisation obligations if water supply and waste-water disposal are explicitly mentioned in the list of concessions. In the GATS negotiations, relevant attempts have hitherto failed at least in the area of water supply. However, in case of the envisaged negative-list approach, the contrary

1 For more information about these liberalisation strategies: Raza, Werner (2014): “Öffentliche Dienstleistungen in internationalen Handelsabkommen: Erfahrungen aus der GATS-2000-Debatte”, in: Prausmüller, Oliver/Wagner, Alice (eds.): Reclaim Public Services, Hamburg: VSA, p.65-85.


applies. Due to this more offensive “catch-all approach”, no separate list of sectors under obligation is necessary anymore: all service sectors are bound by the obligations, unless they are explicitly listed as an exception (“list it or lose it”). Moreover, without comprehensive exemptions, the negative-list approach also automatically covers any future liberalisation measure at a local or national level (the so-called “ratchet clause”). Therefore, these next generation trade agreements are also called a “one-way street of liberalisation” and a “straitjacket” for public interest regulations.

▪ Expanded “regulatory disciplines” and measures on “regulatory convergence”:

All the more, special attention needs to be paid to the current negotiations on TiSA and TTIP, since the development of expanded regulatory disciplines for the services trade is a priority in these negotiations. One proposal that has hitherto failed within GATS is particularly disputed: the introduction of a so-called “necessity test”, which is to assess whether a domestic regulation is “more burdensome than necessary”. Under the heading of “enhanced regulatory disciplines”, measures such as public service obligations, diligent environmental and social impact assessments or licensing requirements run the risk of being deemed a trade barrier.

▪ Special rights of private investors to sue states:

In the context of the CETA agreement between the EU and Canada and the TTIP agreement between the EU and the US, there is now a heightened public awareness of the establishment of “Investor-State Dispute Settlements” (“ISDS” or more recently “ICS”) and extensive obligations of investor protection. These grant investors a privileged right of action against states in special arbitration courts and contain very elastic legal concepts (e.g. “fair and equitable treatment”). Public services are also not excluded from the scope of application of such treaties in this context. This can become expensive for the public sector, especially in conflicts with private (partial) providers (e.g. in the context of concessions, participation of foreign investors in PPPs and forbidden price increases by regulatory authorities).

These recent developments point to an offensive liberalisation agenda that could particularly dim the future prospects for high-quality, universallyaccessible water services. A contrast is provided by the public criticism and the pressure for justification that recent projects such as TTIP, CETA or TiSA have meanwhile come under. Therefore, it is all the more important to intensify pressure on these offensive commercial interests in the long term.


Chapter 1: The involvement of the local level in programming the Austrian EU funds

Alexandra SCHANTL

The involvement of the local level in programming the Austrian EU funds

This article is an abstract of the manual “EU-Programming – a Guideline for Local Government Associations, Cities and Municipalities in the West Balkan Countries & Moldova”, which was elaborated together with the NALAS Network of EU Officers in 2016. The full guideline provides an overview of the programming processes of the EU structural funds focusing on the Western Balkans and Austria and provides recommendations for a better programming involvement of local government associations, cities and municipalities in the future. The following article covers the programming process in Austria, highlighting lessons learned from the elaboration in the partnership.

EU programming in general means setting up long-term objectives for a country, together with financial envelopes and a set of identified projects. For geographic funding instruments, the European Commission usually defines five programming process levels:

▪ country/regional strategy papers (seven-year strategic assessment);

▪ country/regional resource allocation based on population, needs assessment, absorption capacity and political reforms etc.;

▪ national/regional indicative programmes with priorities for the country including multi-year financial envelopes (operational programme);

▪ annual action programmes; and

▪ programme implementation (contracting, management, monitoring and evaluation).

Thus, the geographic instruments are based on shared analyses of local needs and conditions and joint response strategies.1

Figure 1: EU programming definition

KDZ, 2016

1 See: Gavas, Mikaela, Koeb, Eleonore: Setting up the European External Action Service: building a comprehensive approach. London, 2010, S 2-3.


The EU cohesion policy is based on three principles that hold relevance for the level of Europeanisation and multi-level governance: the principle of regionalisation, the principle of partnership and the principle of programming2

▪ Regionalisation requires that funds are administered at the regional level within states, usually at the NUTS 2 level. In this context, not only the NUTS classification of territorial units below the national level in each member state was adopted, but also subnational actors in the policymaking process through regional programming undertaken by regional partnerships were involved.

▪ Partnership needs funds to be administered by actors from different organisations working together. Initially, this principle focused on promoting interaction between governmental actors from different levels. Nowadays, it increasingly emphasises engaging non-state actors.

▪ Programming commits actors to work together in partnership for a sustained period in developing and implementing regional strategies. The switch to multi-annual programming needed to integrate the different structural funding instruments operating in different sectors.

The programming process of the European Structural and Investment Funds (ESIFs)3

The programming and implementation of the ESIFs are based on a system of shared responsibility between the European Commission and the member states. The European Commission negotiates and approves the national strategic reference frameworks and operational programmes (OPs) proposed by the member states, using these as a basis for allocating resources. The member states and their regions manage the programmes. This includes implementing the programmes by selecting individual projects, controlling and assessing them. Furthermore, the Commission is involved in overall programme monitoring, it pays out approved expenditure and verifies the national control systems.

2 Bache, Ian: Europeanization and multi-level governance: EU cohesion policy and pre-accession aid in Southeast Europe, Southeast European and Black Sea Studies, Sheffield, 2010, S. 1-12.

3 The European Structural and Investment Funds (ESIFs) is the European Union’s main investment policy tool with a budget of 454 billion euros for 2014-2020, aiming at providing support to deliver the Europe 2020 Strategy for creating more and better jobs and a socially inclusive society by fostering economic, social and territorial cohesion. It is a common designation for five European Funds: the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF) operating under a common framework as well as under fund-specific regulations. For cohesion policy, two key instruments have been established: the investment for growth and jobs to less-developed, transition and more-developed countries supported by the ERDF, ESF and CF and the European territorial cooperation, supported by the ERDF.


Chapter 1: The involvement of the local level in programming the Austrian EU funds

KDZ, 2016

One of the fundamental changes of the programming period 2014-2020 was the establishment of the Common Strategic Framework (CSF) at the EU level for harmonising the objectives and strategies of the EU’s financial assistance to the member states. Another change concerned partnership. Two “instruments” have been developed aimed at promoting and strengthening the involvement of relevant stakeholders, also addressing the local level and civil society organisations:

▪ The Partnership Agreement4

▪ The European Code of Conduct on Partnership5

The partnership agreement (PA) with each member state was to serve as a link between the EU framework and the individual national/ regional operational programmes of the various funds. The partnership agreement defines the national contribution to the EU objectives and the concrete measures to be taken to achieve these objectives.

The European Code of Conduct on the Partnership Principle requires member states to strengthen cooperation between their authorities responsible for spending EU structural and investment funds and project partners to facilitate the sharing of information, experiences, results and good practices in the 2014-2020 programming period to ensure effective spending.

Accordingly, the involvement of relevant stakeholders in the programming processes somehow has institutionalised. What not has been laid down thus far is the way in which to involve the stakeholders. The Committee of Regions6 criticised this for allowing a wide margin of flexibility and interpretation for the implementation.

4 Annex I of Regulation (EC) No 1303/2013.

5 The Commission delegated regulation of 07.01.2014 on the European Code of Conduct on the Partnership Principle in the framework of the ESI Funds (C(2013) 9651 final).

6 European Committee of Region: Opinion of the Outcome of the negotiations on the partnership agreements and operational programmes of the ESI Funds (2015/C 313/08).

Figure 2: System of shared responsibility

Another challenge with partnership is that it pretends to equalise tiers of government that are unequal as the upper can often set the rules and finances of the lower. Furthermore, partnership as defined in the mentioned documents is less a way of carrying out multi-level governance decisionmaking and more a form of corporatist arrangement.7

The Austrian ESIF programming process STRAT.AT 2020

In Austria, the process of the partnership agreement (STRAT.AT) was carried out by the ÖROK (Austrian Spatial Planning Conference8).

The programming process comprises two levels:

▪ the strategic level or the elaboration of the partnership agreement with the European Commission; and

▪ the programme level for elaborating the single operational programmes.

Thus, the partnership agreement process needed to be undertaken in close cooperation and interaction with the development of the operational programmes for the funds EAFRD, EMFF, ERDF and ESF, while at the same time differentiating it. STRAT.AT 2020 served as a platform for developing the common themes for the national objectives and preparing a partnership agreement that took place parallel to the programming process for the ESI Funds.

The STRAT.AT 2020 process took two and a half years, starting in April 2012 and ending in October 2014 with the adoption of the partnership agreement by the European Commission.

The working bodies included three working groups:

▪ STRAT.AT 2020 Steering Group

The Steering Group comprised high-ranking public officials like heads of sections, directors of the offices of the Länder, general secretaries, etc. and it met twice a year. They were the link between the project group, the Subcommittee on Regional Economy and the political bodies of ÖROK by carrying out strategic steering tasks for the overall process.

7 Vgl. Nicola Francesco Dotti (ed.): Learning from Implementation and Evaluation of the EU Cohesion Policy, RSA Research Network on Cohesion Policy, Brussels, 2016, S. 298-299.

8 The Austrian Conference on Spatial Planning (ÖROK), founded in 1971, is an organisation established by the federal government, the Länder and municipalities to coordinate spatial development at the national level. Within the context of European regional and spatial development policies, ÖROK has played an important role as the coordinating body between the internal and the European level since Austria’s accession to the European Union. ÖROK’s tasks in the preparations for the programming period include, for example, defining the regional aid map pursuant to the EU state aid rules (Art. 87 EC-Treaty), coordination of the national distribution of funds from the EU Structural Funds as well as issues relating to evaluation and programme administration (Vgl.


Chapter 1: The involvement of the local level in programming the Austrian EU funds

▪ STRAT.AT 2020 Project Group

The Project Group was responsible for the core process defining the common themes and strands for the national objectives of the cohesion policy and the policy for the development of rural areas/rural development. The Project Group included the responsible bodies from the programming authorities as the Federal Ministry of Labour, Social Affairs and Consumer Protection, the representatives of the Federal Ministry of Agriculture, Forestry, Environment and Water Management, the bodies of the Länder responsible for ERDF and the Federal Chancellery responsible for the overall coordination.

▪ STRAT.AT 2020 Focus Groups

Focus Groups were a highly flexible element of the STRAT.AT 2020 process. The Focus Groups were set up by the Steering Group to carry out preparatory work to clarify and deepen certain issues and topics. The topics of the respective Focus Groups and their composition were thus agreed individually. The Focus Groups reported to the Project Group, which decided on the further use of the results for STRAT.AT 2020. Overall, fourteen Focus Groups were established within the process. In order to inform other relevant institutions and the public on the process and provide know-how exchange, the following measures were set out:

▪ Three STRAT.AT 2020 forums open to all actors involved in the programming (programme implementation partners, economic and social partners, the Austrian Association of Cities and Towns and the Austrian Association of Municipalities, intermediaries, NGOs, experts/academia, etc.). The forums provided information on the interim results and feedback, as well as deepening the exchange among the actors from all programming worlds.

▪ Two hearing procedures for the draft partnership agreement, the second of which was carried out as an online consultation.

The involvement of the local level

The Austrian cities and municipalities were mainly involved in the programming process via their associations, which participated in and contributed to all STRAT.AT working bodies. The Austrian Association for Cities and Towns (AACT) also carried out additional activities with the support of the KDZ Centre for Public Administration Research, aiming at bringing the cities’ interests to the operational programmes:

▪ As a first step and already before the start of the programming process in 2012 the AACT formulated a position paper on the urban dimension in the EU policy demanding for better funding for the urban dimension, earmarking 25 percent of the Regional Fund (ERDF) and a combination with the means of the Social Fund (ESF). The position paper was handed over to Mr. Hahn, Commissioner for Regional and Urban Policy at that time. The paper was elaborated by the AACT working group on European urban policy, established in 2009. During the STRAT.AT 2020, the working group supervised the programming process strategically.


▪ Undertaking a survey on EU projects in cities and municipalities to gain an overview of the current status and identifying challenges and potentials.

▪ Establishing a learning partnership for cities and municipalities on EU funding and finances to exchange experiences on EU projects (“lessons learned”) and gather information about new funding possibilities for the local level (EU-Wissensnetzwerk Städtebund). A WIKI database on EU funding and finances including best practices of municipalities and cities serves as a supporting tool (

▪ Within the framework of the STRAT.AT 2020 process, the AACT –together with the Austrian Ministry of Transport and Innovation and other stakeholders – co-initiated focus groups on “smart cites”, “sustainable mobility” and “urban areas” and participated in several others.

▪ Finally, meetings with all Austrian provinces (“Länder”) were organised to lobby for the engagement of five percent of the ERDF funds for integrated urban development.

Nevertheless, only partial successes for the local level have been achieved (e.g. Smart City Styria and city-regions in Upper Austria as funding priorities in the ERDF programme). The reasons are manifold.

Challenges and lessons learned

Although the STRAT.AT 2020 was a broad and well-structured process aimed at involving all relevant stakeholders, the following challenges led to certain disappointments for the process output:

▪ Different understandings of the meaning of programming: rather than the strategical approach, often concrete measures were discussed.

▪ Political interests hindered the strategical process: whereas the overall goal should have been the cross-cutting approach, often getting money for one’s own interests was emphasised.

▪ The complexity of the process repeatedly demanded clarification, with negative effects on the meeting efficiency.

▪ Strategy means focusing on certain priorities, in particular when the programme is very restrictive (only few funds with priority concentration in ERDF).

▪ Limited resources for the involvement in terms of both personnel and financial: the time schedule, the process duration and the complexity of the process and contents demanded not only high and flexible time requirements but also certain expertise and know-how.

▪ A lack of preparation for the involvement of the local level in both defining a common strategic approach and identifying needs.

For the local level in Austria, this in particular means devoting even more effort in the upcoming programming process for the EU funding period 2020+, focusing on:

▪ Developing strategic goals to be built upon existing municipal objectives.

▪ Setting priorities for strengthening the informal cooperation between the different governmental levels.

▪ Offering support for process structures on the national level.


Chapter 1: The involvement of the local level in programming the Austrian EU funds

▪ Facilitating the exchange of experiences to prevent negotiation losses.

▪ Strengthening the coordination between the single municipalities and defining a common approach supported by the local government associations (LGAs).

▪ Nominating a person within the LGAs who is responsible for leading the negotiations on behalf and for the needs of the cities and municipalities.

▪ Fostering the cooperation on public administration level if the cooperation at the political level is difficult and/or unsuccessful.

▪ “Management of expectations” by being aware of what is realistic for a fruitful partnership.

▪ Recognising the time of involvement (“architecture of the process”), namely when is the right moment for involvement according to one’s own resources (time resources, expertise, etc.)

▪ Identifying municipal needs and projects on time.

▪ Networking/lobbying on a regular basis with the relevant stakeholders.

Money spending is always a political decision and it is to be assumed that with Brexit the cake is getting smaller. However, it is worthwhile for LGAs, cities and municipalities to enter the upcoming programming process well prepared as a precondition for getting better funding possibilities post-2020. Indeed, the preparations have already started.


EU Programmes 2021-2027 – How to involve local actors in programming Interreg


In the wide array of European funding,1 there is an instrument that is not as known as others despite its great potential for local actors in the Western Balkans and other parts of Europe. European Territorial Cooperation2 –better known as ‘Interreg’ – is one of the two goals of cohesion policy3. It is financed by the European Regional Development Fund4 (ERDF) and it provides a framework for joint actions and policy exchanges between national, regional and local actors from different countries. It finances projects strengthening the cooperation in a wide range of themes5, from research and IT to competitiveness of SMEs and tourism6, from environment and risk prevention to energy efficiency, from transport to education, social inclusion and governance.

Interreg is built around three strands: cross-border cooperation, focusing on areas close to national borders; transnational cooperation, focusing on wider functional areas; and interregional cooperation. For countries in preaccession, Interreg is financed by the IPA II7 Fund, for both transnational areas and regions sharing a border with EU Member States8

Instead of being managed centrally from Brussels, Interreg is managed locally by 91 authorities, each responsible for a specific geographical area9. The overall financial allocation is just 2.8% of the EU Structural Funds, but the type of projects financed can be very strategic for local actors, because it provides opportunities for cooperation with regions of other countries, which would not be possible otherwise. Along the multiannual financial framework of the European Union, Interreg programmes have a

1 For a comprehensive overview see e.g.

2 Regulation (EU) No 1299/2013

3 For details, see e.g. investment-policy/

4 Regulation (EU) No 1303/2013, Regulation (EU) No 1301/2013

5 For details, see e.g. priorities

6 While Interreg does not directly tackle “tourism”, it considers it a cross-cutting theme (see 2014/guidance_tourism.pdf), for countries in pre-accession “tourism” is one of the thematic objectives (IPA Regulation (EU) No 231/2014 Annex III d).

7 IPA Regulation (EU) No 231/2014

8 See the list of programmes at ipa/cross-border/

9 See an overview at european-territorial/


Chapter 1: EU Programmes 2021-2027

life cycle of seven years: current programmes started in 2014 to end in 2020. In the coming years, the future generation of programmes will be developed for the 2021-2027 period, including with the involvement of local actors and civil society.

In this article, we would like to describe practical examples of how the themes of cooperation were selected with the involvement of local actors in the 2014-2020 programming period. The experience of the Austrian national committee – among others responsible for building up national positions in the development of the Danube Transnational Programme –will serve as an example of how these processes run. At the same time, we will describe similar examples from the Western Balkans.

Involvement of Austrian local actors in programming the Danube Transnational Programme10

This chapter describes how local actors – among others – were involved in Austria in the 2014-2020 programming exercise for the development of the Danube Transnational Programme (DTP).

The development of a new programme is largely determined by the legal framework – the various EU regulations for the funds – that are agreed between the European Commission, the European Council and the European Parliament. On this basis, the designated managing authority of a programme organizes studies, needs analyses, evaluations, etc. to provide the partner states participating in a programme area with the necessary information to discuss and decide on the most appropriate set of themes to be funded by a programme. In the case of Interreg, the EU regulations in principle recommended to choose up to four themes out of a list of eleven themes11 (so-called ‘thematic concentration’). In order to prepare the Austrian members representing the Austria in the programming meetings of the DTP, it was thus useful to organize procedures at the national level to discuss and agree on the inputs that these representatives should bring forward.

In Austria, the coordination and implementation of this exercise is ensured at the national level by OEROK12. Important points to be observed were the determination of the timeline with milestones, the stakeholder groups and the way in which information is spread, discussions are designed and decisions are reached.

10 The Danube Transnational Programme was approved by the European Commission on 20 August 2015. For more details on available budget and programme themes, see programme-presentation

11 For details, see e.g. priorities

12 OEROK, Austrian Conference on Spatial Planning was founded in 1971 and is an organisation established by the federal government, the Austrian regions and municipalities to coordinate spatial development at the national level.


Regarding the 2014-2020 programming period, the first structured information flow addressed to the Austrian Interreg cross-border and transnational stakeholder community was launched in autumn 2012, more than a year before the possible start of the new programmes. This was achieved by organizing a kick-off event for invited representatives of the national, regional and local level. The event offered general information on the draft legal framework of the EU as well as progress in programming in the various programme areas. This information was complemented with a first discussion workshop on possible themes matching different programme areas. At the time, the programme area of the DTP was not yet clear (due to the split of the previous South-East Europe Programme in two parts) and the focus was thus rather on getting a first idea on thematic concentration, taking into account the priority areas of the EU strategy for the Danube region (EUSDR) and national strategic plans.

As a follow-up to this event, a questionnaire was developed addressing stakeholders and potential applicants of those three transnational programmes where Austria is participating (DTP, Central Europe and Alpine Space). The questionnaire not only asked for preferred themes and investment priorities, but also expectations about results, intended activities and linkages to relevant strategies. The questionnaire was widely spread, with a sufficiently long timespan for sending answers.

In March 2013, a workshop dedicated to the transnational programmes was organized at the national level, attracting more than 100 participants from all levels, giving ample possibilities for the local level and civil society to be involved and bring in their positions. Due to the kick-off event some months ago and the circulation of the questionnaire, complemented with an analysis of the outcome, the audience was well prepared to engage in more substantial discussions on themes, expected results and improvement of impacts. The discussion was supported by also taking into account project and partnership experience from the previous programming period 2007-2013.

The three activities mentioned above provided a valuable and solid input for the Austrian representatives to feed-in the national positions during the programming task force of the DTP that started two months later.

During 2014, there was one more national event related to programming of the DTP organized by OEROK. Taking the form of a national stakeholder workshop (again including also the national EUSDR coordination platform), it offered the possibility for a participatory dialog with the Austrian representatives in the DTP programming task force. It also helped to better understand the themes and the intervention logic: themes, investment priorities and activities. Thus, due to the early participatory and structured involvement of the relevant stakeholders not only from national but also from all local levels, it was possible to collect valuable perceptions and positions of the stakeholders to feed them in the programming discussion. At the same time, identification with the DTP programme was ensured, as well as active bottom-up participation in the following calls for applications.


Chapter 1: EU Programmes 2021-2027

Involvement of local actors and civil society in programming in Western Balkans – Serbian example in cross-border cooperation

In 2014-2020, IPA II13 funds co-finance twelve territorial cooperation programmes 14 between accession countries and EU Member States with a total EU allocation of EUR 11.7 billion.

In this article, we will take a look how the programming process involving civil society and local actors has been organized in Serbia.

Cross-border cooperation (CBC) with EU Member States has a long tradition in Serbia with continuous implementation that started in 2004 with CARDS funds, moved to IPA I period 2007-2013 and today these programmes are implemented under IPA II (2014-2020 period), now commonly known as Interreg-IPA CBC programmes. The implementation of programmes enables establishing long-lasting contacts between people and institutions on both sides of the border at the local, regional and central level, which represents a good foundation for further cooperation, development and EU integration. Furthermore, through the process of project identification, applying for funds and project implementation, partners from Serbia gain experience in management of EU funds, since all programmes are implemented in accordance with the EU rules, which are almost the same as for internal EU cooperation programmes.

The European Integration Office of the Government of the Republic of Serbia (SEIO15) is responsible for the coordination and implementation of cooperation programmes at the national level. The Department for Crossborder and Transnational Cooperation Programmes works closely with managing authorities and joint secretariats of four CBC programmes located in neighbouring Member States and coordinates the work of local infopoints located in Serbia16. Programming of Interreg-IPA CBC programmes does not differ from any other cooperation programme in the EU. As we have previously seen – based on the example of Danube Transnational Programme – the same EU legal framework has to be respected. In case of IPA II, there is an addition of regulations specifically prepared for the EU external actions17. Managing authorities located in EU Member States

13 IPA stands for Pre-Accession Assistance and is an European Union financial instrument to support candidate countries in preparing for their accession to the EU.

14 Full list of Interreg-IPA CBC programmes #o=cooperation-programmes/interreg-ipa-cbc


16 Serbia also participates in two transnational programmes and three so-called IPA-IPA cross-border cooperation programmes (between IPA Beneficiary countries) that will not be directly addressed in this article.

17 Regulation (EU) No 236/2014 of the European Parliament and of the Council of 11 March 2014 laying down common rules and procedures for the implementation of the Union’s instruments for financing external action; Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 March 2014 establishing an Instrument for Pre-accession Assistance (IPA II); Commission implementing regulation (EU) No 447/2014 of 2 May 2014 on the


organize programming process jointly with their partners in non-Member States. Similar to Interreg programmes, Interreg-IPA CBC programmes also had to follow the thematic concentration approach, choosing their programme priorities out of only eight thematic priorities given in the regulation18.

In order to gather input to define programme priorities, national consultations and discussions had to be organized. SEIO was the main coordinating body of the programming process in Serbia for Interreg-IPA CBC programming and thus was also responsible for collecting opinions and inputs from relevant stakeholders at the national level. Stakeholders were involved in determination of priorities and programming in various ways, from direct participation as members of programming task forces to giving opinions or through public consultations and workshops. Depending on specificities and needs of cooperation programmes’ areas (i.e. border regions in Serbia), different actors were involved.

Since it was impossible to involve each and every stakeholder from civil society and public sector to secure their proper representation and involvement in determining programmes’ priorities, a network of relevant associations and organisations was used. The main organisations used to ensure relevant input from public sector and civil societies were the Sectoral Civil Society Organizations (SECO) mechanism, Standing Conference of Towns and Municipalities, Office for Cooperation with Civil Society, Chambers of Commerce and – where appropriate – relevant regional development agencies, among others.

Sectoral Civil Society Organizations (SECO) is a mechanism established for cooperation between civil society and public sector in the planning and utilization of international development assistance funds. It was created in 2011 at the initiative of the European Integration Office (SEIO). In the SECO mechanism, civil society organizations are divided according to areas into ten sectoral civil society organizations19 (e.g. competitiveness, transport, environment and energy, etc.). SEIO coordinates cooperation between the civil society and the public sector, distributing and gathering information through sectoral approach relevant for preparation of EU programmes (and other international assistance).

Standing Conference of Towns and Municipalities20 (SKGO) was involved directly in programming as a joint representative of local authorities by giving overall input and feedback during programming. In addition to SKGO, which acted as a sort of an overview body, relevant regional or local authorities also directly participated in programming task forces in their respective programme areas.

specific rules for implementing Regulation (EU) No 231/2014 of the European Parliament and of the Council establishing an Instrument for Pre-accession assistance (IPA II);

18 Thematic priorities of IPA II assistance are defined in Annex III to Regulation (EU) No 231/2014.




Chapter 1: EU Programmes 2021-2027

The challenge of how to include numerous civil society organisations in the programming process was overcome with a help of the Office for Cooperation with Civil Society21. It served as a link between SEIO and non-governmental organisations. Through established procedures, this office would involve larger civil society organisations in relevant programme areas to serve as a leading coordinator of other civil organisations in that area and collect their inputs and comments or be a part of programming task force.

Many economic actors were also involved, depending on the needs and the nature of border regions – including chambers of commerce, regional development agencies, the National Alliance for Local Development (NALED), etc. – defining needs, preparing proposals of activities and sending all of this information to SEIO.

Together with designated managing authorities, SEIO planned and coordinated the organization of workshops and information days around programme areas to collect inputs from general public and other interested stakeholders who were not directly addressed during the consultation and programming process.

SEIO played a key role as a central place for collecting and summarizing all the information, comments, feedbacks, proposals sent by local actors and civil society. Based on these, a national position was defined and as such presented in programming groups and task forces to create the most appropriate priorities for each and every Interreg-IPA CBC programme in which Serbia participates.

The two examples from Serbia and Austria provide useful hints on some important elements that need to be observed to ensure wide, proactive and fruitful participation of local actors and the civil society in the forthcoming programming process for the 2021-2027 EU funds.



The Danube Financing Dialogue and the seed money facility START

The Danube Region encompasses fourteen partner countries1 with great economic and social disparities, ranging from the richest to the poorest countries in Europe. In June 2011, the European Council approved the EU Strategy for the Danube Region (EUSDR), aiming at increasing prosperity and improving living conditions for over 100 million citizens in the region. The strategy links the objectives of Cohesion Policy with EU Enlargement and European Neighbourhood Policy (ENP) and thereby seeks to contribute to a sound macro-regional development. The implementation of the EUSDR is guided by the EUSDR Action Plan, which lays down the key areas of intervention in the twelve thematic priority areas of the strategy that particularly address challenges in the Danube Region.

The European Union (EU) provides policy frameworks and financial instruments such as the European Structural and Investment Funds (ESIF) for EU members as well as the Instrument for Pre-accession Assistance (IPA) or the European Neighbourhood Instrument (ENI) for non-EU member countries to stimulate development and tackle market failures. However, the countries of the Danube Region face major challenges in spending these funds. According to the European Commission2, Bulgaria, the Czech Republic, Hungary, Slovakia and Romania are among the countries with the lowest absorption rate in the EU. The European Commission has identified various reasons for the low ability to spend EU funds, such as the lack of regional and national co-financing related to the economic crisis, shortcomings in administrative capacities or inconsistent political ownership. Similar challenges are faced by the countries of the Danube Region outside of the EU. This affects progress in all thematic priority areas of the EUSDR and the overall development in the region. Thus, better absorption of funds proves to be a horizontal issue.

Priority Area 10 of the EUSDR aims at stepping up institutional capacities and cooperation. Apart from working towards strengthening participatory approaches of decision-making and policy implementation by involving civil society in public governance, Priority Area 10 seeks to enhance institutional capacities. This also includes the ability to absorb EU funds to enhance economic, social and territorial cohesion. The EUSDR action plan also refers to the necessity of increasing capacities in this field by

1 Partner countries of the EUSDR: Germany (Bayern and Baden Württemberg), Austria, the Slovak Republic, the Czech Republic, Hungary, Slovenia, Romania, Bulgaria and Croatia, Serbia Bosnia and Herzegovina, Montenegro, Ukraine (Chernivetska Oblast, Ivano-Frankiviska Oblast, Zakarpatska Oblast and Odessa Oblast) and the Republic of Moldova

2 COM(2013) 210 final: Cohesion policy: Strategic report 2013 on programme implementation 2007-2013, European Commission


Chapter 1: The Danube Financing Dialogue and the seed money facility START

calling for a review of “bottlenecks relating to the low absorption rate of EU funds and to ensure better coordination of funding”3

The coordinators of the priority areas are at the interface between concrete projects and the political level. In this position, the coordinators of Priority Area 10 gained some insights in project development in the Danube Region. Experience showed that there is a lack of know-how related to funding opportunities and low capacities for viable project development among project promoters in the region. This leads to a disparity between the intention to implement activities and the actual implementation of projects.

Priority Area 10 thus implemented pilot initiatives aiming at increasing the know-how of project promoters. The pilot projects “Danube Financing Dialogue” and “START” have been initiated to support project planning and design, provide knowledge on financial sources and facilitate cooperation between project partners. These initiatives are also in line with the recommendations of the European Parliament for improving absorption capacities4 and provided valuable findings for future initiatives.

Match-making for SMEs and funding institutions –the Danube Financing Dialogue (DFD)

The Danube Financing Dialogue (DFD) was initiated in 2012, addressing the lack of know-how related to available funding sources for innovative project ideas. The DFD provided a match-making platform for small and medium-sized enterprises (SME) and financing institutions. Until May 2016, five match-making events have been organised in Vienna, Belgrade, Bucharest, Zagreb and Bratislava, each with over 200 participants.

The events facilitated both the exchange of information on financing instruments and investment opportunities as well as networking between SMEs, banking institutions, managing authorities of EU programmes and further project promoters. Within the five DFD events, the initiative gradually developed. Having started as an event for presenting existing instruments of the European Investment Fund or the different central banks and discussing business opportunities, the Danube Financing Dialogue developed to a dialogue platform initiating discussions on how to improve the business environment for innovative start-ups in the Danube Region. The platform also provided advice for successful project development to meet the requirements for the available financing instruments.

The Danube Financing Dialogue received positive feedback from the stakeholders in the region, resulting in a constant number of participants at the DFD events. The Danube Financing Dialogue successfully addressed the need for funding information by providing a comprehensive overview of the financial instruments available in the Danube Region. Additionally, the initiative facilitated the direct exchange between the different stakeholders

3 SEC(2010) 1489 final: EUSDR Action Plan for the European Union Strategy for the Danube Region

4 2010/2305 (INI): Resolution on the Absorption of Structural and Cohesion Funds, European Parliament


and contributed to the match-making for the financing of business ideas and to enhance the mutual understanding of the stakeholder’s needs in the region.

The presentation of existing funding possibilities also shed light on the needs that still have to be addressed to ensure sound development for the future. Start-ups often face a lack of early-stage financing that hampers entrepreneurship and economic growth in the region. Project promoters also need more non-financial support related for project development. Knowhow on viable project design and the access to reliable and experienced project partners are prerequisites to access funding schemes such as the European Structural and Investment Funds (ESIF) or the European Fund for Strategic Investments (EFSI). Project promoters also expressed a strong need for the funding of small-scale projects that initiate first steps for development or pave the way for the implementation of large-scale investments.

Another finding of the Danube Financing Dialogue is the heterogenic needs of project promoters. In this regard, future match-making formats should focus on geographic and/or sector-specific features to ensure more target-oriented support for stakeholders.

Initiating cooperation across borders – the seed money facility START

The pilot initiative START provided seed money for project development and the implementation of small-scale projects in the Danube Region. The facility has been initiated in 2014 and provided funding for two types of projects: a) project preparation and b) small-scale projects. In terms of project development, the initiative funded activities to draft a sound concept for further application to funding schemes such as the programmes of the European Territorial Cooperation or other EU funds. This included networking for setting up strategic partnerships, elaborating a project concept, defining the budget for project implementation and identifying funding options. In terms of small-scale projects, START funded activities such as joint workshops and research studies that gathered data and information on needs and potentials for future development.

START allocated over 1.3 million Euro to small-scale projects aimed at achieving a macro-regional impact. The facility provided funding for public institutions and private entities such as non-profit organisations (NGOs), universities and research institutions and enterprises. Project promoters from all fourteen countries of the Danube Region submitted over 800 applications within the two calls for project proposals that took place in 2014 and 2015.

The START initiative funded 48 project ideas. The selected projects covered all thematic priority areas of the EUSDR, with topics ranging from the standardisation of road safety in South East Europe to promoting sustainable energy management schemes in municipalities, from implementing needs-based vocational training to drafting a capacity-building model for civil servants.


Chapter 1: The Danube Financing Dialogue and the seed money facility START

The overwhelming amount of applications showed the need for simple and small funding schemes such as seed money facilities in order to enable project development in the Danube Region. This finding is also acknowledged by the Danube Transnational Programme, which seeks to implement a seed money facility for project preparation for the 2014-2020 funding period.

Although stakeholders from all countries of the Danube Region submitted and implemented projects, whereby there was an especially strong representation of project promoters from the Ukraine, Austria, Germany, and the Czech Republic. The strong participation of Ukrainian project partners reveals a high innovation potential in the regions outside of the EU that is best realised in small-scale projects.

The applications also showed a high engagement across different types of organisation. Non-governmental organisations account for over fifty percent of project partners, followed by universities and research institutions. The high share of NGOs indicates strong potential for development. However, complex programme rules and correspondent financial obligations might impede the exploitation of this potential.

Building capacities for project development –Lessons learnt

Implementing both the Danube Financing Dialogue and the START facility provided valuable insights into the needs and potentials for development in the Danube Region. As a result, the initiatives revealed shortcomings in the current funding landscape and possible approaches to tackle them. The gained insights may contribute to the development of more target-oriented instruments to support project promoters and increase the absorption rate of funds.

The Danube Financing dialogue as well as the START initiative showed that there is a great need for capacity-building related to project development ranging from the access to information on funding opportunities to the support of initiating cooperation across borders.

The initiatives provided stakeholders from all kinds of organisations –whether public institutions, research institutes, SMEs or NGOs – all over the Danube Region with the means to realise their innovation potential.

In particular, small-scale funding proved to be an effective approach to professionally develop project ideas that lead stakeholders to larher EU programmes or investment instruments or serve as a basis for further development steps. At the same time, it introduced inexperienced project partners to transnational cooperation.

Another finding from the pilot initiatives is that the stakeholders from the EU neighbouring countries showed high interest in these initiatives. This shows the need for further support that integrates regions outside of the EU to make better use of the available funding instruments.

Unfortunately, the amount of initiatives offered to date do not yet meet the demand for support for project promoters in the Danube Region. Further development of capacity-building initiatives is still needed.


Drawing from the experiences of past initiatives, Priority Area 10 implemented further steps to enhance project development.

In 2015, the “EuroAccess Danube Region” database was implemented, addressing the lack of overview on funding opportunities. The database provides comprehensive information on funding instruments at European level in the Danube Region. The tool was built to support stakeholders from the EUSDR partner countries to identify suitable funding programmes and how to gain access to funding.

Additionally, Priority Area 10 develops the Danube Strategic Project Fund (DSPF) that provides funding for small projects and addresses all Priority Areas of the EUSDR. The DSPF aims at supporting projects with a macro-regional impact that require cooperation across borders. A special feature of the funding instrument is its focus on the involvement of EU neighbouring countries. The fund particularly seeks to encourage stakeholders from Ukraine and the Republic of Moldova to further support the development potential in these countries.

Increasing the absorption rate and better spending of EU funds is a crucial step towards economic and social development in the Danube Region. Past initiatives of Priority Area 10 offered not only support to stakeholders but also important insights for capitalization. As experience shows, there is still space for further support for project promoters to better link innovative ideas to the available funding instruments.


Chapter 2: How to deal with the EU-enlargement –the municipal view

The role of local government associations in the EU enlargement negotiations


Local governments and their associations as key stakeholders in the EU integration process – the NALAS Position Paper

Kelmend ZAJAZI, Joachim ROTH

EU funding for local governments in the Western Balkans

Marija ŠOŠIĆ

The Council of Europe tools for improving performance of local authorities

Gennadiy KOSYAK

Trends in fiscal decentralisation in South-East Europe 2006-2014


Local government associations and municipalities in Albania preparing for EU membership


EU integration before getting candidate status – the role of local governments and the association in the Republic of Srpska, Bosnia and Herzegovina

Branislav MISOVIC

Influence of the Montenegrin local governments and association in the EU integration processes


ZELS role regarding a better absorption of EU funds for the municipalities


The role of the Standing Conference of Towns and Municipalities of Serbia (SCTM) in the EU integration


CEMR experiences and support to local government associations in the EU enlargement

Frédéric VALLIER


The role of local government associations in the EU enlargement negotiations

General remarks

Every enlargement is based on EU law. It is not only a political decision of certain Member States; rather, the legal basis for further EU enlargement is Title V of the Treaty on European Union (TEU), namely the articles on EU external action, Article 207 of the Treaty on the Functioning of the European Union (TFEU): international trade agreements, and Article 49 TEU: criteria for application and membership.

The EU has developed a policy to support the gradual integration of the Western Balkan countries into the union. In July 2013, Croatia became the first of the seven countries to join. Montenegro, Serbia, the Former Yugoslav Republic of Macedonia and Albania are official candidates. Accession negotiations and chapters of the acquis have been opened with Montenegro and Serbia, while Bosnia and Herzegovina and Kosovo are potential candidate countries. What does this mean for local governments and their associations? They have to pressure their national governments to include them in the accession process as early as possible.

In 1999, the EU launched the Stabilisation and Association Process (SAP), a framework for relations between the EU and countries in the region, and the Stability Pact, a broader initiative involving all key international players. The 2003 European Council in Thessaloniki reaffirmed that all SAP countries were potential candidates for EU membership. The so-called Regional Cooperation Council replaced the Stability Pact in 2008. Where does that leave the local governments? All decision-makers agree that enlargement calls for profound preparatory measures on behalf of the EU institutions, the Member States and the accession countries. Only a thorough and above all timely preparation will diminish the fears and doubts that exist within wide sections of the population and motivate people to join forces in pushing forward the EU integration process. How can this be achieved? Mostly and only with the help of local governments and their associations. Therefore, the recognition and protection of local and regional selfgovernment in national, EU and international law is vital.

It is so important to include local governments and their associations in the EU integration process and EU policy-making in general because local governments have always contributed a great deal to Europe’s development and prosperity. Local governments are the focal points of people living together and they noticeably influence their quality of life. They promote a sustainable and successful development of their territory, in the interests of their citizens. They organise, commission, finance and deliver essential public services – both universal and targeted to those most in need – and they act as the democratic voice and advocate for their communities.


Local governments make a considerable contribution to the successful implementation of EU law. The close involvement of the local level in the preparatory process is thus a significant precondition for a successful accession.

There exist articles in the EU Treaty that recognise and promise to protect local and regional self-government. Therefore, there is ample legal ground for LGAs to be involved in negotiations and later on in active EU law and policy-making. However, the importance of local governments remains vastly overlooked at all levels. Local governments have to fight to be asked, considered or involved at the national and EU level. It is vital that there is good cooperation and assistance between the member associations of the Council of European Municipalities and Regions (CEMR) (representing EU LG interests in Brussels) and CEMR itself for knowledge-sharing and know-how exchange, not only during EU accession negotiations but also later on in EU law and policy-making.

How could this be done? A first step could be to include local governments and their associations in the preparation of the annual monitoring reports. In these reports, the European Commission services present their detailed assessment of the state of play in each candidate country and potential candidate. The reports show what has been achieved over the last year and set out guidelines on reform priorities. The next reports are due in May 2018 and intensive consultation has been held with state authorities, business and industry, NGOs, embassies, academia, etc. To our knowledge, local governments or their respective associations have never been consulted or asked for their opinion.

Accession strategy

The Stabilisation and Association Process (SAP)

Launched in 1999, the SAP is the strategic framework supporting the gradual rapprochement of the Western Balkan countries with the EU. This policy is based on bilateral contractual relations, financial assistance, political dialogue, trade relations and regional cooperation.

Contractual relations take the form of stabilisation and association agreements (SAAs). These provide for political and economic cooperation and the establishment of free trade areas with the countries concerned. Based on common democratic principles, human rights and the rule of law, each SAA establishes permanent cooperation structures. The Stabilisation and Association Council – which meets annually at the ministerial level –oversees the application and implementation of the agreement concerned. The Stabilisation and Association Committee – which may create subcommittees – assists it. Finally, a Stabilisation and Association Parliamentary Committee ensures cooperation between the Western Balkan countries’ parliaments and the European Parliament following the entry into force of the respective SAAs.

Since the entry into force of the SAA with Kosovo in April 2016, SAAs are now in force with all Western Balkan candidate and potential candidate


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countries. In the case of Kosovo, the SAA is an EU-only agreement, which Member States do not need to ratify (five Member States do not recognise Kosovo as an independent state). Trade and trade-related aspects of SAAs are included in interim agreements: these generally enter into force quickly after signature, as trade is an ‘exclusive’ EU competence. The SAA with Croatia expired when the country joined the union in July 2013.

Regional cooperation

Regional cooperation is a cornerstone of the EU’s policy framework for the Western Balkans. It is seen as a key factor for establishing political stability, security and economic prosperity, as well as a specific requirement under the stabilisation and association agreements.

European integration and regional cooperation are closely intertwined. One of the key aims of the SAP is to encourage countries of the region to cooperate among themselves across a wide range of areas, including the prosecution of war crimes, border issues, refugees and the fight against organised crime. One of the specific components of the IPA is dedicated to regional cooperation and cross-border programmes.

The Regional Cooperation Council (RCC) – which has its headquarters in Sarajevo – operates under the guidance of the South-East European Cooperation Process (SEECP). The RCC aims to support the European and Euro-Atlantic aspirations of its non-EU members and develop cooperation in such fields as economic and social development, energy and infrastructure, justice and home affairs, security cooperation, building human capital and parliamentary relations. The EU and many individual Member States support and participate in the RCC.

Another important regional initiative is the Central European Free Trade Agreement (CEFTA), which not only reduces tariff barriers – including for services – but also includes provisions on government procurement, state aid and intellectual property rights.

Countries of the Western Balkans also participate in regional frameworks such as the Energy Community, the European Common Aviation Area, the South-East Europe Transport Observatory and the Regional School of Public Administration.

Berlin Process

As one of the flagship German diplomatic initiatives, it was started in 2014 to consolidate and keep the dynamics in the EU integration process in the light of increased euroscepticism. It is an intergovernmental cooperation initiative aimed at revitalising the multilateral ties between the Western Balkans and selected EU member states (Germany, France, Italy, the United Kingdom, Austria, etc.) and improving regional cooperation in the Western Balkans on the issues of infrastructural and economic development.


Accession process

Applicants for EU membership must fulfil the Copenhagen political criteria. Once a country is recognised as a candidate, it moves through the various stages of the process at a rate largely dependent on its own progress. The candidate country must adopt and implement all EU legislation (the acquis communautaire). The commission reports regularly on progress. The council takes every important decision – acting by unanimity – from the opening of negotiations to their closure. Eventually, the accession treaty has to be endorsed by European Parliament and the council before being ratified by all contracting states. Candidate and potential candidate countries receive financial assistance to carry out the necessary reforms. Since 2007, EU pre-accession assistance has been channeled through a single, unified instrument, namely the Instrument for Pre-Accession Assistance (IPA). Most candidate and potential candidate countries may also participate in EU programmes such as Erasmus and Erasmus Mundus for students.

Excursus: Copenhagen Criteria (after the European Council in Copenhagen in 1993 which defined them) are the essential conditions that all candidate countries must satisfy to become a member state. These are:

▪ Political criteria: stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

▪ Economic criteria: a functioning market economy and the capacity to cope with competition and market forces, administrative and institutional capacity to effectively implement the acquis1 and ability to take on the obligations of membership. The union’s capacity to absorb new members while maintaining the momentum of European integration is also an important consideration.

Excursus: An applicant country for EU membership2 may be granted candidate country status by the European Council based on a recommendation by the European Commission. Candidate country status does not give a right to join the union automatically; rather, the Commission examines the application in light of the Copenhagen criteria3 and draws up an opinion, while the European Council decides to open accession negotiations4 with the candidate country.

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Screening of the acquis communautaire

The term refers to an analytical review of the acquis communautaire of each accession candidate in various areas. Candidate countries5 have to accept the acquis before they can join the EU and make EU law part of their own national legislation. Adoption and implementation of the acquis are the basis of the accession negotiations.

The acquis is the body of common rights and obligations that is binding on all the EU member states. It is constantly evolving and comprises the content, principles and political objectives of the treaties, legislation adopted pursuant to the treaties and the case law of the Court of Justice, declarations and resolutions adopted by the union, instruments under the Common Foreign and Security Policy, international agreements concluded by the union and those entered into by the member states among themselves within the sphere of the union’s activities.

The 35 chapters of the acquis

Chapter 1: Free movement of goods

The principle of the free movement of goods implies that products must be traded freely from one part of the union to another. Sufficient administrative capacity is essential to notify restrictions on trade and apply horizontal and procedural measures in areas such as standardisation, conformity assessment, accreditation, metrology and market surveillance.

Chapter 2: Freedom of movement for workers

The acquis under this chapter provides that EU citizens of one Member State have the right to work in another Member State. EU migrant workers must be treated in the same way as national workers in relation to working conditions, social and tax advantages.

Chapter 3: Right of establishment and freedom to provide services

Member States must ensure that the right of establishment of EU national and legal persons in any Member State and the freedom to provide crossborder services is not hampered by national legislation.

Chapter 4: Free movement of capital

Member States must remove, with some exceptions, all restrictions on movement of capital both within the EU and between Member States and third countries.

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Chapter 5: Public procurement

The acquis on public procurement includes general principles of transparency, equal treatment, free competition and non-discrimination. In addition, specific EU rules apply to the coordination of the award of public contracts for works, services and supplies, for traditional contracting entities and for special sectors. The acquis also specifies rules on review procedures and the availability of remedies. Specialised implementing bodies are required.

Chapter 6: Company law

The company law acquis includes rules on the formation, registration, merger and division of companies.

Chapter 7: Intellectual property law

The acquis on intellectual property rights specifies harmonised rules for the legal protection of copyright and related rights. Specific provisions apply to the protection of databases, computer programs, semiconductor topographies, satellite broadcasting and cable retransmission.

Chapter 8: Competition policy

The competition acquis covers both anti-trust and state aid control policies.

Chapter 9: Financial services

The acquis in the field of financial services includes rules for the authorisation, operation and supervision of financial institutions in the areas of banking, insurance, supplementary pensions, investment services and securities markets.

Chapter 10: Information society and media

The acquis includes specific rules on electronic communications, on information society services, in particular electronic commerce and conditional access services, and on audio-visual services.

Chapter 11: Agriculture and rural development

The agriculture chapter covers a large number of binding rules, many of which are directly applicable. The proper application of these rules and their effective enforcement and control by an efficient public administration are essential for the functioning of the common agricultural policy (CAP).

Chapter 12: Food safety, veterinary and phytosanitary policy

This chapter covers detailed rules in the area of food safety. The general foodstuffs policy sets hygiene rules for foodstuff production. Furthermore, the acquis provides detailed rules in the veterinary field, which are essential for safeguarding animal health, animal welfare and safety of food of animal origin in the internal market.


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Chapter 13: Fisheries

The acquis on fisheries consists of regulations, which do not require transposition into national legislation. However, it requires the introduction of measures to prepare the administration and the operators for participation in the common fisheries policy, which covers market policy, resource and fleet management, inspection and control, structural actions and state aid control. In some cases, existing fisheries agreements and conventions with third countries or international organisations need to be adapted.

Chapter 14: Transport policy

EU transport legislation aims at improving the functioning of the internal market by promoting safe, efficient and environmentally sound and userfriendly transport services.

Chapter 15: Energy

EU energy policy objectives include the improvement of competitiveness, security of energy supplies and the protection of the environment. The energy acquis consists of rules and policies, notably regarding competition and state aids (including in the coal sector), the internal energy market (opening up of the electricity and gas markets, promotion of renewable energy sources), energy efficiency, nuclear energy and nuclear safety and radiation protection.

Chapter 16: Taxation

The acquis on taxation covers extensively the area of indirect taxation, namely value-added tax (VAT) and excise duties. It lays down the scope, definitions and principles of VAT.

Chapter 17: Economic and monetary policy

The acquis in the area of economic and monetary policy contains specific rules requiring the independence of central banks in Member States, prohibiting direct financing of the public sector by the central banks and prohibiting privileged access of the public sector to financial institutions.

Chapter 18: Statistics

The acquis in the field of statistics requires the existence of a statistical infrastructure based on principles such as impartiality, reliability, transparency, confidentiality of individual data and dissemination of official statistics.

Chapter 19: Social policy and employment

The acquis in the social field includes minimum standards in the areas of labour law, equality, health and safety at work and anti-discrimination. The Member States participate in social dialogue at the European level and in EU policy processes in the areas of employment policy, social inclusion and social protection.


Chapter 20: Enterprise and industrial policy

EU industrial policy seeks to promote industrial strategies enhancing competitiveness by speeding up adjustment to structural change, encouraging an environment favourable to business creation and growth throughout the EU as well as domestic and foreign investments.

Chapter 21: Trans-European networks

This chapter covers the Trans-European Network’s policy in the areas of transport, telecommunications and energy infrastructures, including the community guidelines on the development of the Trans-European Network and the support measures for the development of projects of common interest.

Chapter 22: Regional policy and coordination of structural instruments

The acquis under this chapter mostly comprise framework and implementing regulations that do not require transposition into national legislation. They define the rules for drawing up, approving and implementing Structural Funds and Cohesion Fund programmes reflecting each country’s territorial organisation.

Chapter 23: Judiciary and fundamental rights

EU policies in the area of judiciary and fundamental rights aim to maintain and further develop the union as an area of freedom, security and justice. The establishment of an independent and efficient judiciary is of paramount importance. Impartiality, integrity and a high standard of adjudication by the courts are essential for safeguarding the rule of law.

Chapter 24: Justice, freedom and security

EU policies aim to maintain and further develop the union as an area of freedom, security and justice. On issues such as border control, visas, external migration, asylum, police cooperation, the fight against organised crime and against terrorism, cooperation in the field of drugs, customs cooperation and judicial cooperation in criminal and civil matters, Member States need to be properly equipped to adequately implement the growing framework of common rules.

Chapter 25: Science and research

The acquis in the field of science and research does not require transposition of EU rules into the national legal order. Implementation capacity relates to the existence of the necessary conditions for effective participation in the EU’s Framework Programmes.


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Chapter 26: Education and culture

The areas of education, training, youth and culture are primarily the competence of the Member States. A cooperation framework on education and training policies aims to converge national policies and the attainment of shared objectives through an open method of coordination, leading to the “Education and Training 2010” program, which integrates all actions in the fields of education and training at European level. In terms of cultural diversity, Member States need to uphold the principles enshrined in Article 151 of the EC Treaty and ensure that their international commitments allow for preserving and promoting cultural diversity. Member States need to have the legal, administrative and financial framework and necessary implementing capacity in place to ensure sound financial management of the education, training and youth community programmes (currently Leonardo da Vinci, Socrates, Youth).

Chapter 27: Environment

EU environment policy aims to promote sustainable development and protect the environment for present and future generations. It is based on preventive action, the polluter pays principle, fighting environmental damage at source, shared responsibility and the integration of environmental protection into other EU policies. The acquis comprises over 200 major legal acts covering horizontal legislation, water and air quality, waste management, nature protection, industrial pollution control and risk management, chemicals and genetically modified organisms (GMOs), noise and forestry. Compliance with the acquis requires significant investment. A strong and well-equipped administration at national and local level is imperative for the application and enforcement of the environment acquis.

Chapter 28: Consumer and health protection

The consumer protection acquis covers the safety of consumer goods as well as the protection of the economic interests of consumers in a number of specific sectors. Member States need to transpose the acquis into national law and to put in place independent administrative structures and enforcement powers which allow for effective market surveillance and enforcement of the acquis.

Chapter 29: Customs union

The customs union acquis consists almost exclusively of legislation which is directly binding on the Member States. It includes the EU Customs Code and its implementing provisions, the combined nomenclature, common customs tariff and provisions on tariff classification, customs duty relief, duty suspensions and certain tariff quotas, and other provisions such as those on customs control of counterfeit and pirated goods, drugs precursors, export of cultural goods as well as on mutual administrative assistance in customs matters and transit.


Chapter 30: External relations

The acquis in this field mainly comprises directly-binding EU legislation that does not require transposition into national law. This EU legislation results from the EU’s multilateral and bilateral commercial commitments, as well as from a number of autonomous preferential trade measures.

Chapter 31: Foreign, security and defense policy

The common foreign and security policy (CFSP) and the European security and defense policy (ESDP) are based on legal acts, including legally binding international agreements, and on political documents. The acquis comprises political declarations, actions and agreements.

Chapter 32: Financial control

The acquis under this chapter relates to the adoption of internationallyagreed and EU compliant principles, standards and methods of public internal financial control (PIFC) that should apply to the internal control systems of the entire public sector, including the spending of EU funds

Chapter 33: Financial and budgetary provisions

This chapter covers the rules concerning the financial resources necessary for the funding of the EU budget (‘own resources’).

Chapter 34: Institutions

This chapter covers the institutional and procedural rules of the EU. When a country joins the EU, adaptations need to be made to these rules to ensure this country’s equal representation in EU institutions (European Parliament, Council, Commission, Court of Justice) and other bodies and the good functioning of decision-making procedures (such as voting rights, official languages and other procedural rules) as well as elections to the European Parliament.

Chapter 35: Other issues

This chapter includes miscellaneous issues that emerge during the negotiations but are not covered under any other negotiating chapter. No such issues have been identified at present. Chapter 35 is dealt with at the end of the negotiating process.

Current status

[according to the progress already achieved in the accession negotiations]


Montenegro applied for EU membership in December 2008, more than two years after declaring its independence (which was recognised by all Member States). The country was given candidate status in December


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2010, and accession negotiations were opened in June 2012. In line with the EU’s ‘new approach’ to the accession process, the crucial rule of law chapters – Chapter 23 on judicial reform and fundamental rights and Chapter 24 on freedom, security and justice – were opened at an early stage in the negotiations in December 2013. 28 chapters had been opened with Montenegro to date.


Serbia closely follows after Montenegro and has opened eight chapters to date. Its EU integration process is linked to the comprehensive normalisation of relations with Pristina, which does not require Serbia to recognise Kosovo. Serbia submitted its application for EU membership in December 2009 and was granted candidate status in March 2012 after Belgrade and Pristina reached an agreement on Kosovo’s regional representation. Acknowledging Serbia’s progress towards normalising relations with Kosovo, in particular through the ongoing EU-facilitated Belgrade-Pristina dialogue, the June 2013 meeting of the European Council endorsed the Commission’s recommendation to open accession negotiations with Serbia. The EU-Serbia SAA entered into force in September 2013, and accession negotiations with Serbia were formally opened on January 21, 2014. The first two chapters – including the one on normalisation of relations with Kosovo – were opened in December 2015.


Albania applied for EU membership on April 28, 2009, a few days after the entry into force of the EU-Albania SAA. In October 2010, the Commission recommended that accession negotiations be opened once the country met the requirements for 12 ‘key priorities’. The Commission noted good progress in 2012, and recommended that the country be granted candidate status, subject to the adoption of pending reforms. These conditions were largely met prior to the country’s June 2013 parliamentary elections, which were positively assessed by international observers. In October 2013, the Commission therefore unequivocally recommended granting Albania the status of candidate for EU membership. The council took note of this recommendation in December 2013 and granted candidate status in June 2014. The actual opening of negotiations depends on Albania’s progress on five key priorities and notably the urgent reform of the judicial system, likely next year (2018).

Former Yugoslav Republic of Macedonia

The Former Yugoslav Republic of Macedonia applied for EU membership in March 2004 and was granted EU candidate status in December 2005. In 2009, the Commission recommended opening accession negotiations with the country: a recommendation supported by Parliament and reiterated in every Commission progress report and Parliament resolution since. However, in its 2015 report the Commission made its recommendation conditional on the continued implementation of the June/July 2015 political


agreement (known as the Pržino Agreement) and substantial progress in the implementation of the urgent reform priorities. The unresolved, longstanding dispute with Greece over the country’s use of the name ‘Macedonia’ is an important obstacle to further EU integration.

Bosnia and Herzegovina

Bosnia and Herzegovina is a potential candidate country. An SAA was negotiated and signed in June 2008, although its entry into force had been frozen, mainly due to the country’s failure to implement a key ruling of the European Court of Human Rights. The EU’s ‘renewed approach’ to the country, which puts more focus on economic governance, allowed the long overdue entry into force of the SAA on June 1, 2015. On February 15, 2016, Bosnia and Herzegovina officially submitted its application for EU membership. A positive assessment by the Council will depend, inter alia, on urgently needed progress on the reform agenda and a truly functioning, effective coordination mechanism. The EU also provides support for the implementation of the 1995 Dayton peace agreement, notably through the EUFOR ALTHEA mission. Since 2011, a single person fulfils the mandates of EU Special Representative in Bosnia and Herzegovina and Head of the EU Delegation.


Like Bosnia and Herzegovina, Kosovo is a potential candidate for EU accession. After its unilateral declaration of independence in February 2008, the EU stated that Kosovo had a clear ‘European perspective’. All but five Member States (Cyprus, Greece, Romania, Slovakia and Spain) have recognised its independence. In the region, Serbia and Bosnia and Herzegovina have not recognised Kosovo. The EU has appointed a Special Representative in Kosovo, who is also the Head of the EU Office, and has established the EULEX Rule of Law mission. A Visa Liberalisation Roadmap was issued in June 2012. In its May 2016 fourth report on Kosovo’s progress in this area the Commission stated that Kosovo had met all the requirements, although two outstanding issues should be dealt with by the day of adoption of its proposal by the European Parliament and the Council. After a landmark agreement on normalising relations was reached in April 2013 by Belgrade and Pristina, the European Council decided to open negotiations on an SAA with Kosovo in June 2013. The SAA was signed on October 27, 2015 and entered into force on April 1, 2016 following its ratification by the European Parliament (consent). Kosovo’s future EU integration – like Serbia’s – remains closely linked to the outcome and implementation of the EU-facilitated high-level dialogue between Kosovo and Serbia.


André De Munter, European Parliament

EU-COM DG NEAR (Neighbourhood Policy and Enlargement Negotiations) website

LOGON Reports 1999 to 2005


Chapter 2: Local governments and their associations

Local governments and their associations as key stakeholders in the EU integration process – the NALAS Position Paper

1 Refocusing on the Western Balkans

The celebration of the 60th anniversary of the Treaties of Rome – establishing the European Economic Community and paving the way for what today is known as the EU since the Lisbon Treaty – is a good opportunity to direct the EU’s attention to a neighbouring region that seemed to have lost the priority on the EU agenda. The fact that the Western Balkans shared a post-war experience like the six signatory countries of the Rome Treaty and by taking into consideration the crucial role of the region for the preservation of peace throughout Europe led the EU to launch activities from 2000 until 2008 to enhance stability, mutual understanding, peaceful coexistence and economic growth through trade embedded into a perspective of future EU integration. The dynamics, reform willingness, enthusiasm, hope and motivation generated since then have been fading gradually, giving way to apathy, reform stalemate, impatience and rising scepticism regarding EU membership.

At present, tensions in the Western Balkans are rising. Social protests in the whole region are piling up, reflecting the political and socioeconomic standstill and increasing instability. These protests are met with mounting geopolitical pressure to destabilise the region and draw countries away from EU accession and NATO membership.

In the light of these events, witnessed by EU foreign affairs chief Federica Mogherini during her trip to several Western Balkan countries in March 2017, EU leaders have expressed alarm at the problems and reaffirmed their commitment to support stability and deepen political and economic ties with and within the region. In fact, the EU Council Summit conclusions of 9 March 2017 refer to the situation in the Western Balkans as “fragile”, stressing the importance of reforms, good neighbourly relations and reaffirming its “unequivocal support for the European perspective of the Western Balkans”. It was made clear that the EU remains committed and engaged at all levels to support the countries of the region in conducting EU-oriented reforms and projects.

In this context, the Network of Associations of Local Authorities of South-East Europe (NALAS) offers its institutional support and cooperation as an important stakeholder to work together with EU institutions in a partnership for stability and growth to promote democratic reforms, good governance, the rule of law and sustainable development at the local level in the Western Balkans.

Since its creation in 2001, NALAS has been committed to promoting


local democracy under the auspices of the Stability Pact and the Council of Europe, contributing to the reconciliation and stabilisation process in the region and thus subscribing to the process of the European integration of the whole region in a bottom-up approach.1 We strongly believe that change processes can only be sustainable and generate the desired impact if they are supported from the local level upwards by convinced, pro-active and committed citizens in a strategic alliance with public administration and authorities sharing the same vision. Decentralisation as a pillar of the democratic reform process is crucial for social cohesion, stability and peace in the Western Balkan countries and for the future of Europe. If Europe wants to be close to its future citizens, then it has to go local. The EU is about people, for people and around people. The location where people live, act, meet and liaise directly with government and public administration is the local level! A functional bottom-up approach depends on effective coordination and cooperation between local and central government level to be successful.

The following proposals aim to strengthen dialogue facilities between the EU and the local level. They are conceived as a contribution to adapt EU support instruments to better correspond to the needs of local authorities in preparing for EU accession and the adoption of standards by local public administrations. Furthermore, a brief analysis of the most pressing issues within the region should stress the importance of conceiving LGAs and LGs as crucial stakeholders and strategic partners in the EU integration and reform process in strengthening local democracy.

2 Proposals for dialogue facilitation

EU institutions should bear in mind the specificities of local and regional authorities as one tier of government and engage with local authorities in multi-stakeholder dialogues on issues related to EU integration and reform processes. It should be stressed that local and regional governments are both policy-makers and service providers according to rights and obligations embedded in their national legislations. EU programming should recognise this fact by simplifying e.g. financial rules and allowing support to local government civil servant staff via its instruments and facilities honouring the principle of subsidiarity and acknowledging the importance of associations of local authorities as a stakeholder and interlocutor.

Therefore, it is necessary to implement a more inclusive consultation processes at all stages of planning, programming and decision-making on all issues affecting local government, taking into account the specific role, competences, tasks and responsibilities of local governments, which are different from other local actors (i.e. private and civil sector). NALAS strongly advocates including the local government dimension in strategic and operational planning for EU enlargement.

1 See the position paper of the Standing Conference of Towns and Municipalities, the National Association of Local Authorities of Serbia, a NALAS member association, on “The impact of EU accession on local authorities in Serbia”, Belgrade, December 2013.


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2.1 EU Commission - technical or administrative unit for LGAs and LGs to address

One of the major impediments for LGAs and LGs is the restrictions that they face in addressing the EU Commission. They are not a stand-alone partner for DG NEAR, but rather communication and cooperation is realised with the central government. At present, there is no technical or administrative unit in DG NEAR dealing separately with LGs in candidate countries.

We strongly recommend reverting this situation and considering LGAs as a main stakeholder and interlocutor in the EU accession process.

2.2 European parliament working group

Working groups are the backbone of the EP’s political work. Here, common positions and strategies on major policy areas are summoned and specific recommendations are submitted. The former SEE working group of the EP was an effective forum to address issues of common interest and it played a major role in paving Croatia’s accession to the EU.

We recommend that the political parties represented in the EP and interested in EU relations with the Western Balkans consider the reestablishment of the former SEE working group or establishing a Western Balkans working group.

2.3 Western Balkans Cooperation Days

Every year, the EP organises special events focusing on specific geographical areas, like the Mediterranean.

NALAS invites the EP to consider the organisation of the Western Balkans Cooperation Days on an annual basis in cooperation with the Committee of the Regions.

3 EU support instruments

3.1 TAIEX – technical instrument for IPA countries

By the end of 2015, the EU Commission decided to put to a halt the Local Administration Facility (LAF). When the LAF was operational, local governments in the region had direct access to EU policy-makers, using the opportunity to closely familiarise themselves with EU policies and their impact at the local level, especially when it comes to environmental protection, agriculture, regional development, sustainable tourism, fiscal decentralisation, financial management, economic and social cohesion. The cessation of LAF deprives the local government level in the region of specific support to prepare for future EU integration. Since its interruption, there is actually no single thematic support promoting LGs or LGAs in the EU Commission as compared to the Council of Europe. Furthermore, the privileged direct relation between the EU and the central government level


of the IPA countries is reflected within the TAIEX procedures. LGAs and LGs of the accession countries cannot submit technical support requests to TAIEX. They need to be addressed and channelled via the respective line ministries of the central governments.

NALAS invites the EU Commission to reconsider LAF or an alternative that corresponds to LAF’s overall objectives and specific purpose to help local governments to develop, strengthen their role and contribute to political, economic and institutional stabilisation in our region as the key elements for EU accession.

3.2 Instrument for pre-accession - IPA II

The Multi-Country Indicative Strategy (2014-2020) IPA II does not address local authorities as a key layer of governance. The lack of components designed for local development and the specific needs of cities, towns and local government entities bear witness of this omission. Besides, for a majority of municipalities in the accession countries, the perception prevails that EU projects/programmes remain too complex to be coped with given the circumstances within local administrations and the diversity of realities that they represent. The Commission’s efforts/promises to simplify EU Fundraising via project/programme access was largely counteracted by increasingly sophisticated and complex fund control mechanisms. A balance should be struck between feasible auditing/control mechanisms and the capacity on the spot at the regional and local level to put them into practice.

NALAS invites the EU Commission to include LGAs as part of the IPA negotiation, programming, monitoring and evaluation process. This consideration should comprise the regional as well as the national consultation process.

3.3 Civil society organisations – local authorities (CSO-LA) programme

The CSO-LA programme managed by DG DEVCO as part of the Development Cooperation Instrument (DCI) supports civil society organisations and local authorities as drivers of development. It enables beneficiaries to honour their ability to provide help and encourages long-term partnerships linking civil society and local authorities to play a greater role in development strategies.

The lack of access to the DCI CSO/LA programme in the current period (2014-2020) is a major loss for local authorities of the IPA II beneficiary countries.

Since there is no similar/comparable programme available in IPA II, NALAS recommends launching a CSO-LA programme for the region.


3.4 Bridge fund facility for local self-governments to pre-finance EU-funded projects

A main challenge that municipalities face throughout the region is related to the pre-financing of EU projects. For the implementation of projects in the frame of cross-border, transnational cooperation and most other EU programmes, local governments largely have to pre-finance up to 90% of the funds. This implies that pre-financing has to be covered by their own resources for project activities until they are refunded by the EU, which in some cases can take up to 12 months. On the other hand, the NALAS annual Fiscal Decentralisation Indicators Report2 shows that SEE local governments’ revenues are far below the EU average, competences are decentralised without the adequate resources and local governments are dependent on government transfers, which results with low investment capacity. Pre-financing thus represents a serious bottleneck and obstacle to participate in EU programmes, especially for smaller municipalities.

In this regard, support for local governments to access available EU funds and ensure the pre-financing of municipal projects through establishing a needs-oriented financial instrument would support local governments in the preparation and implementation of EU-funded projects.

A bridge funding mechanism could provide for: i) covering a temporary shortage of funds in the process of project implementation; and ii) financing ineligible costs, which are important to ensure the sustainability and integrity of a project.

A very successful bridge funding instrument exists in the Bulgariandenominated Fund for Local Authorities and Governments (FLAG).

In order to enhance possibilities of municipalities with insufficient financial resources to participate in EU programmes and access EU funding, NALAS recommends establishing a bridge funding facility for local governments in the region.

3.5 EU aid facilities in humanitarian and natural disaster situations to support local governments3

In 2015, the EU redirected its attention again to the Western Balkans as a result of the migration/refugee crisis, with the aim of mitigating its repercussions and implications for Union member countries. Municipalities and not central governments along the so-called Balkan route were the frontrunners to face the migration/refugee crisis, providing basic services in this unprecedented man-made disaster. Using its resources and shouldering the main burden, municipalities depleted their limited resources and compromised their assets and funds and strained their budgets.

The unique management of local governments in the migration/refugee crisis should be recognised!


3 - NALAS Plovdiv 2015 Declaration on Disaster Risk Management

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Considering the potential risk of renewed migration/refugee movements (returnees and integration) affecting the region, NALAS recommends that adequate support facilities should be provided for local governments in the frame of EU humanitarian and disaster aid facilities.

4 Regional analysis

In recent times, social protests in the whole region have been piling up, reflecting the political and socio-economic standstill and increasing instability. These events suggest that the Western Balkan candidate countries continue to face deep structural problems. The consequences of the global and European economic crisis – which has heavily hit the Western Balkans – have certainly been a key factor in recent years, having a negative impact on the EU reform efforts throughout the region, which continues to have an effect. However, it is the tendency towards autocratic leaderships, the shifting of the balance of the power principle versus a dominant executive branch on the expense of the legislative and judiciary, the infringement on fundamental freedoms, widespread corruption and territorial issues that further threaten stability, peace and democracy as a whole in the region. The crisis reveals an erosion of the covenant between governments, ruling parties and the citizens. This results in a crisis of trust, whereby one no longer relies on the institutions and hardly on the elected politicians. The crisis of trust leads to questioning of hitherto commonly-shared values and principles and challenges democracy as a way of life as well as an institutional and structural guideline. Finally, the crisis of the EU model is reflected by increased EU fatigue. RCC’s SEE Balkan Barometer 2016 shows that Euroscepticism is strong in the region as a whole. The findings show that almost 60% of the survey sample have negative or mixed feelings and are sceptical towards EU membership.

NALAS is convinced that a functional bottom-up approach is best suited to contribute to building a sound and sustainable basis for the regional reform process by strengthening local democracy. Bringing the citizens closer to the EU implies going local! What is required is to revert the unsuccessful triple-down effect carried out by the EU for the past 40 years since the Treaty of Rome. This is where LGAs and LGs together can play a crucial role.

In fact, it is time to (re)discover the local level as the transmission belt to carry the European ideals of a peacefully-united continent into the region and promote it there bindingly. Laying the foundations of an ever-closer union among the peoples of Europe to ensure economic and social progress and improve the citizens’ living and working conditions starts by living and experimenting the EU at the local level. Therefore, under the present circumstances we urge EU institutions to consider LGAs and LG as a crucial stakeholder and strategic partner at the local level in the context of the EU integration process.

At NALAS, as a step in the right direction we advocate implementing more inclusive consultation processes at all stages of planning, programming and decision-making on all issues affecting the local government by taking


Chapter 2: Local governments and their associations

into account the specific role, tasks and responsibilities of local governments, which are different from other local actors (i.e. private and civil sector), as well as including the local government dimension in strategic and operational planning for EU enlargement.


EU funding for local governments in the Western Balkans


The article represents the main findings and recommendations for local governments of the Western Balkans in the use of EU funds, based on the experiences gained during the implementation of the BACID Programme (“Capacity Building of the countries of the Western Balkans and the Republic of Moldova”) in the 2015-2017 period1. Among other activities supporting public administrations and relevant stakeholders in European integration, the programme has been providing support to NALAS (Network of Associations of Local Authorities of the South-East Europe)2 in approaching European policies to municipal administrations as well as better access to EU funding. The assistance in EU funding included several activities:

▪ Elaboration of the NALAS EU Roadmap, with a section addressing the role of local government associations (LGAs) in the improved access of municipalities to EU funding.

▪ Expert support to the NALAS EU Project Managers’ Network, gathering professionals in the development and implementation of EU-funded projects.

▪ Facilitation of cooperation with the European sister organisation CEMR (Council of European Municipalities and Regions) and its advocacy and lobbying activities in Brussels and link to its EU-funded project PLATFORMA3

▪ Participation in the EC Public Debate on EU External Financing Instruments lead as part of the Mid-Term Evaluation of External Financing Instruments for the 2014-2020 period.

▪ Elaboration of guidelines on the role of local governments and its associations in EU programming

▪ Additional assistance provided to local government associations, regional development agencies and municipalities directly by various Austrian organisations through the BACID Fund4, a facility for small-scale know-how transfer actions supporting European integrations.

The article provides a brief overview of relevant funding, a summary of key issues identified for the effective use of EU funding at the local level, as well as the importance of proper preparation for EU accession.

1 More information about the programme is available at:



4 All awarded grants are presented at the programme website, section:


Chapter 2: EU funding for local governments in the Western Balkans

EU funds available to local governments in the Western Balkans and the Republic of Moldova

In order to follow the financing opportunities, it is important to have a comprehensive overview of available funds and programming and implementing procedures. While they are only listed here, the links to content with all information are provided for further reading.

The EU funds are programmed for the period of seven years, for financing within the European Union as well as the assistance given to non-EU countries across the world. Different instruments are in use under the common term of EU external aid actions5. The programmes relevant for the local governments in the Western Balkans and the Republic of Moldova in the 2014-2020 period within external aid6 are:

▪ Programmes with geographic coverage:

– Instrument for Pre-accession Assistance II7 (IPA II) for the Western Balkans supporting the EU Enlargement Policy.

– European Neighbourhood Instrument (ENI) covering among other countries, Eastern Partnership policy that includes Moldova as one of the partner countries8

▪ Programmes with thematic coverage:

– European Instrument for Democracy & Human Rights (EIDHR) as a thematic widely-available instrument, implemented based on EU Action Plan on Human Rights and Democracy (2015-2019)”9

– Instrument Contributing to Stability and Peace used in case of crisis10

– Civil Society Organisations and Local Authorities’ available to Moldova, as part of Development Cooperation Instrument11

In case of IPA II, the programming is undertaken through different modalities:

5 All EU External Aid Funds include: European Development Fund, Development Cooperation Instrument, European Neighbourhood Instrument, Instrument for Pre-accession Assistance, Instrument contributing to Stability and Peace, European Instrument for Democracy & Human Rights, Partnership Instrument, Instrument for Nuclear Safety Cooperation, Instrument for Greenland.

6 Some EU programmes used by the users within the European Union are open for IPA and some other countries (as described later in the text).

7 All information about thematic priorities, financial allocations and programming per country is available at: instruments/overview_en



10 Several projects are implemented in Bosnia and Herzegovina:



Country programmes

All funding at the country level is based on multi-annual strategic planning documents for the whole region, country and specific sectors covering areas closely linked to the enlargement strategy. The funds are distributed through 8-9 sectors, among which the sector on democracy and governance is the most important in terms of institutional support to European integrations (including public finances, professionalism, efficiency and effectiveness of public servants at both local and national levels, their ethics and integrity, transparency in work, etc). The other sectors also address the needs of local governments, such as the environment (and climate action), transport, competitiveness and innovation, education, employment and social policies, etc.

The particular programmes under each sector may be led by the national institutions from which local governments have direct benefit (for example, the construction of roads, capacity building for public internal financial control at all levels), or the funds may be distributed through grant schemes open to different actors including municipalities (for example, for active employment measures, social inclusion) or targeting only local governments (such as the exchange programme in Serbia, grant scheme for less-developed municipalities in Montenegro funded under IPA I).

The participation in European Union programmes (open to actors from EU member states) is also supported through IPA and Democracy and the governance sector. The most relevant for local governments are Europe for Citizens, Employment and Social Innovation (EASI), Horizon 2020, while Cosme, Creative Europe, ERASMUS+, Customs and Fiscalis are also available12

Multi-beneficiary IPA13

It includes instruments targeting more countries at the same time, as support achieve priorities defined at the country level:

▪ Twinning14 and Taiex15 as instruments that provide expert assistance in EU integration available to public administration at the national level in both IPA and ENI countries. Special support was also provided to civil society (TACSO project), while local governments are currently not benefiting from these instruments.

12 An overview of the most relevant programmes is provided under the BACID Fund by the EuroVienna for Montenegrin municipalities and available on the programme website Programmes_Montenegro_FINAL.pdf



15 In the previous period, the Local Administration Facility (LAF) was part of TAIEX but stopped after a negative evaluation report: neighbourhood-enlargement/tenders/taiex_en


Chapter 2: EU funding for local governments in the Western Balkans

▪ Regional structures and networks ensure funding to joint organisations in the Region, although neither NALAS nor other local government networks are among them16

▪ Regional investment support provides – among others – loans and grants to investment projects at the local level that are supported by national governments, including the Western Balkans Investment Framework17 and Regional Housing Programme18

▪ Territorial cooperation is most accessible to local governments being eligible to apply for grants with partners from other countries under a) cross-border programmes targeting two or three neighbourhood countries and b) transnational programmes supporting the implementation of EU macro-regional strategies for the Danube19 and Adriatic-Ionian region20. All programmes have websites, manuals and assistance with detailed and practical advice on applying and implementation.

Key issues in the absorption of EU funding by local governments

The public consultations lead by the European Commission at the occasion of the Mid-Term External Evaluation of EU External Funding in 2017 gave the opportunity to local governments associations gathered around NALAS to share their experiences, express concerns and provide proposals on how to improve the absorption capacities of local governments during pre-accession. The identified key issues are linked to the relevant final recommendations of the evaluation report:

The evaluation recommends that the Civil Organisations – Local Authorities (LA) programme funded under the Development Cooperation Instrument closed for IPA countries as of 2014 re-opens for them. The immediate action of the relevant Directorates General of the European Commission is proposed, as this was concluded to be a major loss for IPA local governments “which anyway have only moderate access to EU funding”21. Local governments are in the weakest position in terms of accessing funds compared to national institutions on the one hand and civil society on the other. Supporting the recommendation provided in the Evaluation Report, several issues can be identified to be addressed by re-opening this call:

▪ Better coordination of IPA with thematic instruments and complementarity: thematic instruments provide funds for smaller actions (in terms

16 The funding is provided to: Regional Cooperation Council (RCC), Regional School of Public Administration (ReSPA), Central European Free Trade Agreement (CEFTA), the Prosecutors’ Network, South-East Europe Transport Observatory (SEETO), Energy Community, etc.




20 and

21 Chapter 4.4.2, Conclusion 10, Page 63 of the External Evaluation of Instrument for Pre-accession Assistance (IPA II) – Final Report – Volume 1 - June 2017


of money and duration) and can complement well the IPA funds, although coordination during programming as well as the evaluation of applications is needed.

For local governments, better coordination would ensure that the activities implemented on their territories are complementary, while simultaneously allowing them to apply with smaller actions as preparatory or follow-up for larger projects.

▪ Partnerships at the community level: even though local governments and CSOs in the region still see each other on different sides, the thematic instruments and accession processes urge them to cooperate. While EIDHR and IfSP have very specific priority topics mainly dealing with emergency issues, the CSO-LA should provide more space for sound cooperation of these two sectors as main actors in community development. With CSOs often being more experienced with EU funds and local governments being able to ensure sustainability and necessary co-funding, their partnership has benefits for both sides.

▪ Practice of local governments to manage EU funds: at the same time, with the limited direct access to EU funding, LGs do not have the opportunity to gain sufficient practice and thus improve their absorption capacities.

The Evaluation Report proposed to the EC to draft comprehensive guidance on the establishment of sector monitoring systems, while NALAS members stressed the need for their proper involvement in monitoring the distribution of EU funding.

The sector planning approach was assessed in the Evaluation Report as a positive change, although the quality of documents developed in most of the cases should be improved. The EC is advised to clarify the importance and processes to all relevant parties. Here, the implementation of sound and transparent consultations holds strong importance: LGs and LGAs should be represented in all Sectoral Working Groups during programming, while they should also be active in preparation, implementation, monitoring and evaluation in a systematic manner, represented by local government associations (LGAs). Even though consultations are required in rules for IPA programming, the quality of the process is still not verified. The national institutions responsible should invest more in providing sufficient guidance, time and opportunities for contribution with quality inputs in implementing the IPA II sector approach. Closer monitoring by the European Commission represented by EU delegations would likely ensure the consideration of inputs from LGs and LGAs. Moreover, it is necessary to take into account the special position of local governments in all consultations and EU processes: local governments are part of public administration providing services to other stakeholders and citizens, with important tasks and legal commitments in the EU integration process and after accession. Thus, they cannot be perceived as one of the stakeholders involved in consultation, although their participation should be obligatory.

It includes their effective capacity building and regular information sharing: it is important to prepare LGs’ staff for the use of EU funds in the same manner as the staff of the national governments to be fully aware of


Chapter 2: EU funding for local governments in the Western Balkans

the programming and monitoring processes and actively participate in them. The national government should keep them continuously informed about the activities and milestones, as well as informing LGs on time to regularly collect and classify important data for the definition of quality indicators and successful monitoring.

As one emerging challenge, staff retention is an issue that needs to be addressed systematically. Having in mind the knowledge and experience that government and municipal employees have gained through the implementation of EU funds to date, institutional memory is crucial for the improvement and sustainability of managing EU funds. This topic is to be tackled at the country level, although the EC support is very strongly welcome to relevant measures such as the elaboration and implementation of staff retention policies in all IPA II countries at both the national and local level, whereby performance-based incentives should be introduced for staff in charge of managing EU funds.

The other important topic initiated by LGAs is financial capacity to ensure obligatory co-financing (usually 15-25%) and pre-financing of the last instalment while the final report is not approved, which may take several months. The establishment of a revolving fund for this purpose in Bulgaria achieved positive results, while a similar initiative has been launched in Montenegro, Serbia and Macedonia.

Finally, the beneficiaries often complain about overly complex and long procedures for the preparation, approval and announcement of calls for proposal, which should be simplified and time-framed. One of the main problems is the excessive time between applying and contracting, thus making budgetary and other planning more difficult.

Additionally, several issues have been raised by the Moldovan LGA as being important in the future programming of ENI.22

EU funding for local governments from the EU accession perspective

Local governments’ access to EU funding in the pre-accession period also has the role of preparing for the use of structural funds available after becoming a EU member, a better understanding of the EU funding system and methods for planning and implementing projects under the rules respected within the European Union. The structural funds are many times larger than IPA II, i.e. 639 billion euros is available for the 2014-2020 period

22 Additional comments specific to the European Neighbourhood Instrument and concretely the experience of local governments in Moldova include: the necessity to respect the principle of subsidiarity in the planning and spending of EU funds; the insufficiently addressed topic of decentralisation as an important part of public administration reforms; budget support is welcomed at the national level, although it often leads to unfair distribution to municipalities; the need to improve the implementation of the conditionality principle and overall improvement of monitoring with the appropriate involvement of local governments; the overall need to invest more in capacity building of municipal staff.


under the common name of European Structural and Investment Funds23 compared to 11.3 billion euros under IPA24. These funds are the most important for the socio-economic development of local governments in less-developed regions, while the main obstacles remain weak administrative capacities and financial sources. For this reason, addressing the challenges before accession and the pro-active attitude of local governments is crucial for successful EU integration, while EU national governments –fully responsible for management of the structural funds – and the European Commission are finding the ways to support them.

The European Code of Conduct on Partnership Principle (ECCP) consultation process in the framework of the European Structural and Investment Funds (ESIF) binds managing authorities to work in close cooperation with local and regional authorities as full partners throughout the whole programming cycle, including preparation, implementation, monitoring and evaluation. While some countries – such as Denmark and the Netherlands – have well-developed mechanisms for its implementation, others – such as Slovenia – only include local governments at the level of information session at the same level as all other stakeholders.

The experiences of Croatia support the initiative of the earlier establishment of funding revolving facilities: they did not have similar funding possibilities before accession, but have established the fund for the use of structural funds after becoming an EU member.

The support to local partnership is provided in structural funds through Community-Led Local Development (CLLD), based on local action groups comprising local public and private organisations, from businesses to citizens groups. Widely used in rural programmes, the approach has been promoted for further use.

Based on the experiences of new member states as well as changes in the management of EU funds that bring closer funding available through different sources to support participatory, integrated sustainable development through a unified strategic framework, local governments in the region will only be able to effectively absorb the EU funds through inter-municipal systematic capacity building while adopting a multi-annual, long-term perspective.

23 The funds include: European Regional Development Fund, European Social Fund, Cohesion Fund, European Agricultural Fund for Rural Development, European Maritime & Fisheries Fund and Youth Employment Initiative. More information at:



Chapter 2: EU funding for local governments in the Western Balkans


Website of the European Commission Directorate-General for International Cooperation and Development (DG DEVCO): europeaid/

Website of the European Commission, Webpage European Structural and Investment Funds:

NALAS Document: Contribution of the Network of Associations of Local Authorities of South-East Europe (NALAS) to PLATFORMA participation in the public debate on EU External Financial Instruments, April 2017

Report on Mid-Term External Evaluation of the Instrument for Pre-accession Assistance (IPA II):

The efficient use of funds for local and regional authorities under the IPA II regulation, Committee of the Regions, November 2014

Cohesion Policy, Planning of EU structural funds: Is Local Government treated as a real partner?, CEMR: piecesjointe/filename/CEMR_report_structural_funds_EN.pdf


Gennadiy KOSYAK

Gennadiy KOSYAK

The Council of Europe tools for improving performance of local authorities

There is always a need to improve the performance of local authorities, making them increasingly effective and democratic: citizens seek a greater say in local decisions, service users demand higher standards and technology offers new opportunities. This can be challenging not only for local authorities, but also for their associations and the ministries.

The Centre of Expertise for Local Government Reform is the Council of Europe operational arm in the field of multi-level governance, supporting central, regional and local authorities to improve their institutions, regulations, capacity and action. Pioneering an innovative business model for capacity-building in local authorities, the Centre is recognised for the quality and modernity of its programmes, which are effective and quality impactoriented and draw on the very best of European experience to develop effective and democratic governance.

Through legal assistance programmes, it has supported numerous central and eastern European countries in their efforts to decentralise. Through capacity-building programmes, it has reinforced the institutional capacity of their local authorities, thus improving the quality of local and regional governance. It has also offered assistance to local authorities in several Western and Nordic countries. The European Strategy for Innovation and Good Governance – enouncing Twelve European Principles of Good Democratic Governance – is another important initiative of the Centre. To date, several countries (Belgium, Bulgaria, the Netherlands, Norway, and Ukraine) have adopted the Strategy and more (Bulgaria and Norway) have obtained accreditation for delivering the European Label of Governance Excellence (ELoGE). More recently, the Veneto region in Italy is adapting the strategy to the regional context and the associations of local authorities in Spain, Portugal, and Greece have expressed their interest in applying. The capacity-building project in Malta includes the implementation of ELoGE. The Centre is planning to engage the countries of the Danube Region in the process and the first steps have been taken by joining the Austrian Danube Governance Hub initiative and presenting ELoGE and other CoE quality management tools to the representatives of public administration that are members of ReSPA (Regional School of Public Administration for the Western Balkans).

The Centre has a pool of capacity-building experts, tools and programmes that it introduces to member States at their request. It works closely with the line ministries responsible for governance and local government matters, national associations of local authorities, professional associations and training institutions. The Centre operates in connection with the European Committee on Democracy and Governance (CDDG) and the Congress of Local and Regional Authorities of the Council of Europe.


Chapter 2: The Council of Europe tools for improving performance of local authorities

The Centre has recently concentrated its efforts on strengthening local governments’ institutional capacity, including raising the standards of leadership, strategic management, service provision, financial management, community participation and public ethics, working with local and central authorities to develop and implement national strategies for local government functions, e.g. training, communication, strengthening the institutional capacity of local authorities to deliver good local government and local government associations to provide capacity-building services to their members.

Moreover, particular attention has been devoted to developing and introducing innovative tools and expertise and facilitating communication drawing on the best of European experience to develop tailored tools (template programmes), disseminating capacity-building tools and programmes in a series of capacity-building toolkits and developing a pool of national and international experts who can support the capacity-building programmes.

The Centre of Expertise develops effective template programmes through innovation, as well as through inspiration from the best of European capacity-building programmes. These “tools” enable the evaluation and reinforcement of local authorities’ capacities in a variety of areas such as local finance, leadership, human resources and performance management, inter-municipal cooperation, transparency and ethics, among others.

The Centre of Expertise is currently implementing 32 full programmes in 20 countries, with the following programmes being the most popular in the Western Balkans countries and the Republic of Moldova:

▪ Leadership Academy Programme

▪ Inter-Municipal Co-operation

▪ Modern Human Resource Management

▪ Local Finance Benchmark

▪ Training Needs Assessment and National Training Strategy

▪ Best Practice Programme

Strong leadership reflects the capacity of local authorities to develop a clear vision for the municipality and make it a reality through strategic management and involvement of the local community, as an essential feature of an effective local authority. Accordingly, the Centre of Expertise has developed a model “Benchmark of an Effective Democratic Local Authority” (the “Leadership Benchmark”), which sets out the expected levels of performance by a local authority in nine leadership competences. More particularly, the Leadership Academy Programme – representing part of this process – offers a series of national and international activities addressed to senior civil servants and elected officials, where the participants are given help with understanding the positive and negative aspects of the leadership in their own municipalities, as well as being supported in undertaking reforms and discussing their results. The toolkit on Leadership has been – or is being – implemented in Albania, Bulgaria, Croatia, Hungary, Ukraine, Montenegro, the Russian Federation, Serbia, Turkey and “the former Yugoslav Republic of Macedonia”.


Another important toolkit is devoted to Inter-Municipal Co-operation (IMC). IMC is a key area for reform with a view to increasing the quality of local government services, efficiency and effectiveness in administrations and leading to more rational urban planning and sustainable local development policies. IMC is seen as an important option available to municipalities for meeting citizens’ expectations for better services, creating more jobs and a cleaner environment. IMC enhances the visibility of local authorities and attracts public and private investments including access to external funds such as EU grants. The toolkit’s immediate aim is to develop a commitment within countries to extend IMC initiatives. It helps to develop IMC awareness and capacity at central and local levels and within local government associations. It is designed for participants with influence or decision-making authority. It can be adapted to the specific circumstances of a country and supports programmes where national authorities establish a framework for enabling IMC and launching a national IMC initiative, as well as where local leadership in specific municipalities also initiate IMC projects. The toolkit was officially launched at an international conference on IMC in Dubrovnik, Croatia, and has been introduced in a number of countries including Croatia, Moldova, the Russian Federation, Turkey and Ukraine.

Modern HRM is indispensable for ensuring high-quality local governance. In many European countries, HRM regulations and mechanisms are either too rigid to allow for the necessary flexibility and efficiency of public action or too lax and thus induce various forms of abuse of power, including politicisation of local public services and mismanagement of human resources. Moreover, local authorities are currently faced with stark budgetary restrictions, with parallel increases in their field of competences and demanding public service users. Modern human resources management is thus indispensable for ensuring the quality of governance at the local level, and the local authority will develop a particular interest for building a genuine and effective human resources (HR) management policy, aimed at equipping the authority with tools that enable improvements to local living conditions. The toolkit on HRM offers practical guidance to municipalities on drawing up job descriptions, hiring and firing mechanisms, appraisal systems linked to promotion mechanisms, as well as methods for identifying local staff training needs. This tool has been implemented in Serbia and Albania.

On a practical note, the modernisation of the Human Resources Management in local administration in line with the Albanian Government strategies on Public Administration, Self-Local Government and Decentralization and the Territorial Administrative Reform and in compliance with the Law on Civil Servants is one of the main components of the “Strengthening Local Government Structures and Cooperation of Local Elected Representatives in Albania” project implemented by the Council of Europe with support from the Swiss Agency for Development and Cooperation.

The main achievement is the creation of e-PAV (Electronic Platform for Public Administration), a web-based HRM tool, a communication platform between two levels of government and a National Registry of Local Administration and an electronic system of the local government frame of competencies, training needs assessment and training delivery. For the


Chapter 2: The Council of Europe tools for improving performance of local authorities

first time in Albania’s history, the registry enables the collection and generation of comprehensive data on all local government employees of Albania, the modernization of human resources management practices in local government, increased capacity of responsible central state institutions –Department of Public Administration, Albanian School of Public Administration, Commissioner for the Oversight of the Civil Service – to deal with human resources in the local government units, improved interaction between LGUs and these responsible central state institutions and enhanced information basis for policy-making institutions (Ministry on Local Issues, Ministry of Finances, etc.) are supported in their decisions and planning. The e-PAV is a major contribution to public administration reform as one of the key EU recommendations for Albania. At present, the 61 new municipalities and 12 regional councils have access to the registry and can update their personnel data and implement the legal framework for the HRM practices, including organisational structure design, recruitment, performance appraisal, training needs assessment and transition measures during the amalgamation process due to the Territorial Administrative Reform. The modernized e-PAV system is compatible with HRMIS (the employees’ register in central government) and will transfer its data on employees’ records as soon as the GoA makes it operational for LG, while all other e-PAV modules, the communication platform (help-desk assistance), the competencies frame, the training needs assessment and training organisation modules will serve as good practices to be implemented in central government institutions in Albania.

The Council of Europe has also provided – in particular through Joint Programmes with the European Union – significant assistance to Serbia in building an institutional framework and capacities for local self-governments. The programmes aimed to establish the proper institutional framework and develop the capacity of Serbian central and local authorities to design, deliver, coordinate and implement regional and local development strategies and concrete projects, using national and external resources. This concrete and targeted action contributed to strengthening the “absorption capacity” of the Serbian central and local authorities and laid down the basis for launching new projects aiming – inter alia – at infrastructural development. Moreover, it led to several reform laws such as the law on local self-government, the law on local elections, the law on territorial organization and the law on the city of Belgrade.

Through the first phase of the Joint Programme with the European Union on Strengthening Capacities of the Local Self Government in Serbia, the Council of Europe has managed to raise awareness of all stakeholders of the importance of HRM in local self-governments. This area was not regulated by the appropriate legislation and the capacities of LSGs were almost non-existent; moreover, there was no clear understanding of the HRM process and thus there was no systematic attempt to regulate and reform this area. Building upon this basis, in the course of the phase 2 of the project the Council of Europe developed – in close cooperation with the stakeholders – a toolkit that synthesised best practices from the EU countries targeting the Serbian stakeholders, as a first step in the process in reforming HRM in LSGs. At the same time, the Council of Europe provided


expert and technical support to the law-makers in Serbia in the process of developing the legal framework for the HRM area. As a result of these efforts, in March 2016 the Parliament of the Republic of Serbia adopted a Law on Employees in Autonomous Provinces and Local Self-Government Units and the Law on the Salary System of Employees in the Public Sector was adopted in February 2016. This opened the door for the real reform of HRM in LSGs. The current reform process is supported by the new CoE and EU two-year joint programme on human resource management in local self-governments that started in March 2016. This particular joint programme will provide technical and expert assistance at both national and local levels and will aim to put the CoE HRM toolkits in action and implement the HRM best practices in Serbia.

It is a known fact that good local government fundamentally depends on the existence of sufficient financial resources, allowing local authorities to offer services adapted to their residents’ expectations and based on good financial management procedures, providing the necessary flexibility in local budgetary questions and clear accountability for financial decisions. With the Open Society Institute (OSI), the Centre of Expertise has jointly developed a new tool based on the Council of Europe acquis. It comprises two benchmarks aimed at local and central authorities dealing with the income and the expenditure side of local finance. The Centre of Expertise and the OSI successfully piloted this tool in Bulgaria, in cooperation with the National Association of Municipalities in the Republic of Bulgaria (NAMRB) and five municipalities. In 2011-13, the tool was implemented in Ukraine. In 2013, a new regional project was launched to implement the tool in the municipalities of Spain, Portugal and Greece. Since 2015, the Local Finance Benchmark has made part of the Centre’s action under the Council of Europe-European Union Partnership Co-operation Programme for Strengthening Local Democracy in the countries of the Eastern Partnership (PCF).

In Moldova, just about a year since a major reform in the field of local public finances has been completed, the Centre of Expertise started – as a part of specific bilateral activities under the PCF with the EU – to adjust and pilot the Local Finance Benchmark Tool to assess the impact of the new local finance system on the financial management at the local level, which came very timely and was welcomed at all levels. In strong cooperation with the Congress of Local Authorities from Moldova (CALM), with the Ministry of Finance and the State Chancellery, the Council of Europe’s expert team tested the tool in ten municipalities from Moldova during 2015-2016 and prepared practical recommendations for each municipality, as well as a consolidated report to improve the local finance management. The adapted local finance benchmark toolkit along with a special web application will be handled to the national association of local authorities to enable further use and dissemination.

In many countries, local government training needs further development: national and local training capacity and training budgets are often inadequate, core training packages may not have been sufficiently developed, trainers themselves may require more training, and there may be insufficient training standards for training programmes or materials. Against this


Chapter 2: The Council of Europe tools for improving performance of local authorities

background, a National Training Strategy (NTS) is developed based on a comprehensive training needs analysis, including independent and reliable field research to allow training to be developed in response to the needs and expectations of local authority staff and elected representatives. In particular, this means undertaking a qualitative investigation based on a series of in-depth interviews with municipal representatives, individually and in focus groups, a survey to assess the results of the qualitative investigation conducted with local authorities and a legal analysis to identify the training necessary for local authorities to fulfill their obligations properly and series of bilateral meetings with key local government stakeholders to take account of their experience and perceptions and build on current and recent initiatives. Once developed, the NTS allows organisations with a stake in local government to establish a more professional training environment. This tool has been – or is being – implemented in Albania, Armenia, Croatia, Georgia, Moldova, Malta and Montenegro. The recently-updated version of the TNA tool is currently being used in Serbia and the TNA is underway, paving the road to further development of the National Training Strategy. In 2015-16, in the Republic of Moldova a training programme was designed and deployed for the authorities of Gagauzia (an autonomous region in the south of the country), aimed at improving the skills of the staff to prepare good quality legislative initiatives and offer motivated and professional opinions on the draft laws prepared by the central government. This was made possible through the PCF between the CoE and the EU mentioned above. The practical approach of the training sessions – preceded by a diagnostic exercise that identified the main shortcomings and training needs – was highly appreciated by the Gagauz authorities. The involvement of the secretariat of the Moldovan Parliament and the State Chancellery in the trainings allowed the direct peer-to-peer exchange.

In every country there are local authorities that achieve the highest standards in some aspects of their work. This best practice can be identified and shared with other local authorities. Learning from each other – rather than from an external expert – is indeed a best practice methodology. The best practice programme applies a systematic approach where best practice achievement in selected themes is identified and recognised through an award, which carries an obligation to pass on the best practice to other local authorities. It can be launched on a yearly basis using different themes. In practical terms, the programme explains how to organise and publicise a best practice competition from the receipt of applications and the drawing up of a shortlist to the fact-finding missions in the applicant local authorities and the eventual award ceremony. During the dissemination phase, open days, study visits, workshops and seminars are organised in the award-winning local authorities and information on the best practice is made available on paper, CD-ROM and in short documentary films, etc. The Best Practice tool set out in Toolkit I has been – or is being – implemented in Albania, Bosnia and Herzegovina, Croatia, Ukraine, Hungary, Moldova, Montenegro, the Russian Federation, Serbia and “the former Yugoslav Republic of Macedonia”.

A particularly positive example in respect of this toolkit implementation can be concretely seen in the Republic of Moldova, where the programme


launched by the Council of Europe in 2005 – which is being implemented by the local actors – aims at identifying, capitalising and disseminating the best practices among local governments in Moldova, thus contributing to making local government more efficient. In the 2005-15 period, the Best Practices Programme collected good practices from more than 350 municipalities, and 71 good practices were reflected in five documentary movies, which have been disseminated among the local authorities from the country. As a result of the programme, many local authorities have “copied” the good practices that were disseminated and successfully implemented them in their communities. From initiatives designed to improving the access to public information (creating a local radio station, live broadcasting) to business incubators and social initiatives (accessible public transport for disabled people, summer camps for socially-vulnerable children, improved access to public services), the Best Practice Programme contributed to the replication of these good practices and incentivised local authorities to perform better, whereby a best practice award is awarded yearly to the best practices.

Finally, it is predominant to emphasise that the Council of Europe’s Centre of Expertise on Local Government Reform and Good Governance Department are demand-driven and remain fully open to expressions of interest from the Council of Europe Member States, whether it is interest in the implementation of the specific toolkits developed by the Centre or the implementation of ELoGE.


Chapter 2: Trends in fiscal decentralisation in South-East Europe 2006-2014


Trends in fiscal decentralisation in East Europe 2006-2014

The Network of Associations of Local Authorities of South East Europe (NALAS) performs regular monitoring of the trends in the area of municipal finance and produces the “Fiscal Decentralisation Indicators for SouthEast Europe” report. The following text is an excerpt from the edition reflecting the period 2006-2014: Levitas, A. et al., Fiscal Decentralisation Indicators for South East Europe 2006-2014, Skopje, Network of Associations of Local Authorities of South East Europe (NALAS) 2016, prepared under the umbrella of the Fiscal Decentralisation Task Force of NALAS. It is the fifth edition of an ongoing effort to provide policy-makers and analysts with reliable comparative data on municipal finances and intergovernmental fiscal relations in South-East Europe.

The underfunding of local governments in South East Europe

Over the last 20 years, efforts to decentralise public services to democratically-elected local governments have been a common theme across South-East Europe. However, progress has been uneven, and there are only few places in the region where local government revenues or expenditures approach EU averages, as a percentage of either GDP or total public revenue. While it is always difficult to judge the adequacy of local government revenues relative to their expenditure needs, there seems little question that in many places in the region municipalities are underfunded.

Chart 1 Local Government Revenue as a Share of GDP in 2006, 2009, 2014

Underfunding is particularly obvious in Albania and the Federation of Bosnia and Herzegovina (BiH), despite the fact that both municipalities have few social sector responsibilities. Municipalities in Macedonia also appear to be significantly under-resourced, although here the underfunding


of basic municipal services is intertwined with the underfunding of primary and secondary education, which has been devolved to local governments. Kosovo1 is at the other end of the spectrum: here, local governments pay for all pre-university schooling, as well as much of primary healthcare. However, their revenues are closer to the average for the EU, in relationship to both total public revenue and GDP. On paper, the situation is similar in Moldova, but central and regional control over municipal budgets makes the indicators misleading. Elsewhere in the region, the degree to which local governments are underfunded is less obvious.

Fiscal autonomy of local governments in South East Europe

Surprisingly, decentralisation has gone furthest in places where higher level governments have trouble collecting taxes and the overall public sector is relatively small. The correlation between small public sectors and the decentralisation social sector functions to local governments – particularly primary and secondary education – suggests that in some places national governments have sought to relieve themselves of the burden of administering services they feel they cannot afford to adequately finance themselves.

With the notable exception of Montenegro, municipalities in South-East Europe only derive about 35% of their revenue from sources over which they have some control. The rest comes from some combination of unconditional grants, conditional grants and shared taxes, particularly shared personal income tax. However, this level of dependency on central government transfers is not unusual. Indeed, it is in line with the average for OECD Member States. Moreover, “transfer dependency” in the region increases as social sector functions are devolved to municipalities, a trend that is also in line with experiences elsewhere. The reason for this is simple but often overlooked: local governments become more dependent on transfers as social sector functions are devolved to them because there are not sufficient robust tax bases that can be reasonably assigned to them. It is important to appreciate this “decentralisation paradox” because too often advocates of decentralisation measure its success by the degree to which local governments “finance themselves.”

1 “This designation is without prejudice to positions on status, and is in line with UNSC 1244 and the ICJ Opinion on the Kosovo declaration of independence.”


Chapter 2: Trends in fiscal decentralisation in South-East Europe 2006-2014

Chart 2 Composition of Local Government Revenue 2006

Chart 3 Composition of Local Government Revenue 2014


Reading from the left of Chart 3 (for 2014), we find Kosovo, Moldova and Macedonia as well as Romania and Bulgaria as EU members. They are the places where local government revenues are now highest as a share of total public revenues. We can also see that the revenues of these five are dominated by conditional grants, with much less coming from shared taxes and own-sources. This is very different from the situation in 2006, with Kosovo and Macedonia having moved from the far right of the chart to the far left: in fact, between 2006 and 2014, they journeyed from being the least decentralised countries or entities in the region to being the most. Moreover, this journey transformed the structure of their revenues, which no longer come mainly from own revenues and shared taxes but rather from conditional and unconditional transfers. Moldova is also interesting in this respect as there were no major new functions devolved to local governments between 2006 and 2014, yet conditional grants have increased at the expense of shared taxes. This is because early in its decentralisation efforts Moldova devolved schooling to local governments, but tried to finance it through personal income tax (PIT) sharing.

The paradox also has important policy implications: instead of trying to make local governments “fiscally autonomous”, reforms should focus on developing the tools, habits and institutions that allow national and local officials to constructively adjust their mutual dependence to changing circumstances. Needless to say, the quality of the institutions habits and tools necessary for constructive intergovernmental dialogue varies substantially across the region, but in general remains weak and in need of support.

Own revenues and the property tax

In much of South-East Europe, municipalities derive significant amounts of own revenue from quasi-fiscal instruments imposed on real-estate transactions, new investment and business operations Central governments in a number of places have started to constrain these practices to improve the “business enabling environment”. As legitimate as these efforts may be, they are compounding the financial problems of local governments in a number of places and should be accompanied by efforts to replace the lost revenue.

Throughout the region, national and local governments have made substantial investments in the technical infrastructure for property taxation. Donors have strongly supported these efforts, which are almost always backed by recommendations from the International Monetary Fund and the American literature on local finance, which argues that the property tax is the single most appropriate tax to devolve to local governments2. Indeed,

2 The North American literature on fiscal federalism stresses the importance of the property tax for local governments. The Nordic countries – the most decentralised unitary states in the world – however, base their local government finance systems on giving municipalities’ wide control over personal income tax rates.


Chapter 2: Trends in fiscal decentralisation in South-East Europe 2006-2014

over the last ten years the tax has become one of the two and three most important own-source revenues in most of the region.

This growth is impressive, although there is also room for improvement. Nonetheless, there are limits to how much the property tax alone can be used to bring local government revenues in line with their service responsibilities. This can be seen from Charts 19 and 20, which show that although the yield of the tax has increased considerably, it still only accounted for 7.6% of total local government revenue in 2014. Moreover, as a share of GDP, the average for the region remains at a modest 0.46%, up from 0.36% in 2006.

Chart 4 Property Tax as % of GDP and Total Local Revenue in 2006


Chart 5 Property Tax as % of GDP and Total Local Revenue in 2014*

*Data for Slovenia include revenues from the land use fee.

In the US and Canada, property tax generates revenues equal to between 2.5 and 3.5% of GDP. However, this is exceptionally high and there are very few countries that manage to obtain more than 2.0% of GDP out of the property tax. Indeed, the average for the EU is only 1.1%. It is also important to recognize that in many countries a disproportionately high percentage of the tax comes from businesses (often over 70%). Finally, it is worth remembering – although the charts do not show it – that within South-East Europe own-source revenues tend to be disproportionally concentrated in capital cities and very strongly tied to the real-estate market through asset sales, land development fees, construction permits, property transfer tax and – to a lesser degree – property tax.

With the exception of Croatia and the Federation of Bosnia-Herzegovina (BiH), property tax has been decentralised throughout the region. In most places, municipalities have substantially improved the yield of the tax. Nonetheless, and with the exception of Montenegro, it still generates revenue equal to well under 1% of GDP, which is the average for the EU. It is thus unrealistic to expect property tax to yield anything like the revenue it does in North America (2-3% of GDP). Furthermore, while achieving EU norms is certainly desirable, it alone will neither solve the region’s problem with underfunding nor radically increase the “fiscal autonomy” of the region’s municipalities.


Chapter 2: Trends in fiscal decentralisation in South-East Europe 2006-2014

Instead, efforts to enhance the revenue-raising capacities of local governments in many places should focus on transforming personal income tax from a shared tax into a tax over which local governments have some ratesetting powers. This can be achieved by giving them the right to impose a surcharge on the rate set by the central government, as is already practiced in Montenegro and Croatia. Alternatively, “PIT space” can be divided between the national government and local governments, as is currently being considered in Bulgaria.

Municipal investments and borrowing in South East Europe

In most of the region, local governments are spending higher shares of expenditure on investment than their counterparts in the EU, despite receiving significantly lower shares of total public revenue. This suggests that municipalities in South-East Europe are working hard to make-up for the infrastructure deficits that they inherited from the past. However, since 2009, investment rates have fallen significantly in most of the region, and in a number of places are only holding their own due to the influx of EU structural funds.

Scarce investment funds also tend to be spent on pay-as-you-build road projects and not on pay-as-you-use environmental facilities. This is because planning roads is simpler, whereby construction can be delayed if money runs out, tangible benefits can be delivered within a single election cycle and because in much of the region municipal borrowing remains a marginal phenomenon.

In Albania and Serbia, the consolidated debt of the general government now exceeds the limits set by the Maastricht Treaty. Here, ministries of finance are likely to restrict the access of local governments to credit to reduce the consolidated public debt and/or preserve borrowing space for their central governments. In these countries, efforts should be made to reserve some debt space for municipalities.

More generally, however, the adequacy and predictability of local government revenues will have to be improved if municipalities are to have the resources against which to prudently incur debt. Part of the answer here is to increase the own revenue-raising powers of municipalities by strengthening property taxation and/or introducing local PIT surcharges. Indeed, part of the answer lies in enhancing and stabilizing transfer systems, efforts that almost everywhere pay particular attention to questions of horizontal equity. Finally – and perhaps most importantly – national and local government officials need to recognize that decentralisation actually intensifies the need for continuous, informed and substantive intergovernmental dialogue, and that – like it or not – the fate of national and local governments are joined together at the hip.


Gender-responsive budgeting in South-East Europe

In 2015, the NALAS report included a focus on gender-responsive budgeting and concluded that there is a small number of practices and formal policies for its introduction. This may suggest that the relationship between gender equality commitments and governance at the local level are rather unclear to the local/central government actors or that such practices are unknown to the associations of local authorities. Where policies and practices exists, local governments and their associations could more actively engage in exploring and promoting their results as means to both encourage others and make the local actors more visible in the process of advancing gender equality. The fact that 40% of the countries stated that local governments are undertaking some kind of gender budget analysis of local-level policies and 10% that have done gender-responsive budgeting analyses suggests there is a political will to engage and understand the implications of local decisions and policies. What is lacking is acting more systematically. Genderresponsive budgeting tools are currently only applied in Kosovo, Republika Srpska (BiH) and Turkey. The extent of application or a possible form of institutionalisation at the central/local level in South East Europe requires further, more in-depth research.


Chapter 2: Local government associations and municipalities in Albania


Local government associations and municipalities in Albania preparing for EU membership


The current status of LGs and LGA is a product of the dynamics of the political, economic and social factors of transition, as well as historical, traditional, cultural and social psychology.

The dynamics of the process can be divided into three stages.

Stage one corresponds to 1992-2000. During these years, free local elections were held for the first time after the decline of the communist regime. It marked important developments for local government with the approval of laws on organization and functioning of local government and territorial administrative division comprising 309 communes and 65 municipalities as a first tier and 36 regions as a second tier. Despite this, local government units were not strong as the system remained very centralized and local government had very limited authorities. A very important step was undertaken by the Albanian Parliament in 1999 with the ratification of the European Chart for Local Self Government, marking a step towards the empowerment of local authorities and an approach to European standards.

Stage two relates to 2000-2015, during which local authorities took more power and competences into their hands, which followed the implementation of the European Charter for Local Self-Government and the approval of a new law on local government. The territorial division did not change much, going to 308 communes, 65 municipalities and 12 regions. In my personal opinion, this was the best time for operational local units that could provide solution to real situations and important needs. The system – as it was – might seem fragmented but it was proactive, all inclusive, close to the citizens and in compliance with subsidiarity.

Stage three from 2015 currently marks significant changes to the form and substance of competences of local governments. These were results of the administrative reform that divided Albania into 61 municipalities while the number of regions remained the same. Former communes transformed into administrative units as subdivisions of new municipalities, while new authorities were delegated to municipalities. Nonetheless, local governments require further reforms and efforts for integration with the aim of a fair power distribution, in harmony with decentralization and recognized standards.

These developments in local governments were at all times parallel to the development of local government associations. The Albanian Association of Municipalities was established in 1993, the Association of Communes in 1997 and the Association of Regions in 1999. These associations have


performed quite well, mostly assisting local units to achieve a better understanding of what they are, what they do and should do to contribute to the country’s integration into the EU.

Processes and stages of local government development and intersections with the country’s road to EU integration

Local governments are undeniably affected in many aspects by the process of integration and membership of Albania into the EU. Despite the overall impact that the approach with the EU has in the politics and economy of a country, the impact on local and regional authorities can be defined in at least two aspects, namely the “costs” to be covered and the “benefits” that this process offers.

In response to the role of municipalities and regions, the associations of local authorities in Albania have increased their role over the years, starting from 1992 when a new era of functioning of local governments began for the first time after the change of regime from dictatorship to democracy.

Pre-accession and accession to the EU significantly enhance possibilities of cooperation, twinning and exchange of experience with local authorities of other countries, increasing the likelihood of developing joint projects that certainly translate into added value for local and regional authorities.

Finally, membership makes local units part of a “joint network” along with other regional/local actors and increases the likelihood of an impact on European decision-making that matters at the local and regional level.

Of course, when we talk about impact in the form of coping with either the costs or benefits, it should be understood that the extent of this impact differs from one country to another and even from one local government unit to another. Accordingly, it depends on a number of factors for Albania to be considered, as follows:

First, the level of impact is related directly to the level of fiscal decentralization and the functions within the competence of local government in a given country. Albania’s experience to date in the process of fiscal decentralization proves to be progressive but has also stepped back several times. Indeed, although the local government had significant fiscal instruments during 2002-03 (such as taxes on small businesses, which was later in 2013 abrogated as a municipal competence, drafting a law on local tax system, etc.), intervention in taxation law limiting the competence of local authorities to set the type, level and basis for temporary local taxes and tariffs directly affected local financial capacity.

Albania is currently in the drafting process of a law on local finances, with the contribution of the local government associations, which is a positive step.

During these years, the associations of municipalities and communes have been important actors in the process. Their role involved active participation in legal drafting, training on capacity-building of municipal staff and lobbying for the laws to protect municipal interests. With the support


Chapter 2: Local government associations and municipalities in Albania

and cooperation of many donors such as Sida, USAID, Swiss Cooperation, etc., many training manuals have been prepared on local tax management.

Second, the impact of EU integrations also relates to the administrative organization of the country. In 2015, Albania undertook a Territorial Reform aiming at a closer approach with European models. This is increased citizens’ expectations for the merged 61 municipalities to perform with higher quality and lower administrative costs.

The harmonisation between rural and urban development of local government units is another important factor to be considered as it influences the types of public services to focus on, the kinds of local incomes, etc.

The associations have even been active in the process of the territorial reform. The Association of Communes with the engagement of Swedish experts conducted the first study on a potential territorial reform, which concluded in five possible options, whereas the Association of Municipalities lobbied for a political consensus, wide inclusive discussions and local referenda on the model of local government.

The third factor is related to the readiness of the local government units to meet the costs and absorb the benefits deriving from the membership process. The more prepared that a local unit is, the easier it becomes to overcome costs of implementing European legislation and the more that it can benefit from European funds.

Following its objective to become a member of the EU, in the last decade Albania has engaged in preparing legal acts and undertaking other public initiatives, adapting them to the requirements of the EU. All of these new initiatives – such as the law on local borrowing, the law on asset management, the law on transfer of properties to local government, new functions, etc. – require clearly-defined policies on increasing local capacities for a more accurate implementation. Above all, they require financial support, realistic budgeting, transparent non-political funds’ allocation for each municipality, etc.

The local government associations have focused on increasing awareness and capacities at the local level of local elected and civil servants to gain knowledge on the impact, delivery and instruments available for easier and optimal implementation of such a legal framework and the preparation for the integration process.

Thus, in cooperation with CoE, UNDP, Sida and Swiss Cooperation and other civic organizations, we have carried out regional trainings on drafting project proposals, respective manuals, trainings on improving local finances and IPA instrument, etc.

The associations of local authorities needed the experience of other countries that are ahead in this process. The experience has shown that the EU was initially seen by regional and local authorities as a potential source of profit from financing and European programmes, and perhaps this is the most simple to evaluate, but experiences also show that it is more difficult to assess the costs and benefits associated with the implementation of European legislation, given that they can be direct or indirect.


We learned from experts coming from EU countries who assisted us on the role that the associations could play, i.e. the Association of Municipalities was assisted by VNG (Netherlands’ Local Government Association) and the Association of Communes was assisted by SKL International (as part of the Swedish Association of Local and Regional Authorities). Besides this assistance, further experience exchange happened with municipalities from new EU member countries. A notable experience is the implementation of the twining project in 2013 by the Association of Municipalities as part of the Europe for Citizens programme.

The EU membership asks for approximation of the legislation and municipalities are important actors as service providers. What are some of the implications of the legislation approximation? Upon first glance, the integration process seems to be more vertical than horizontal, as the central government has the main responsibilities in leading the political process, although the role of the local government is also crucial.

While the LGAs have been committed to assist local government in a smoother process of integration, making use of all resources and means available for their use, more could have been done if the associations were more involved in the central process. The cooperation and interaction with the Ministry of Integration – as the institution leading the EU integration process at the central level – was lacking and we have urged the ministry to establish a more frequent cooperation with associations so that the local voice could be heard at earlier stages.

Direct legal implications

The influence of European legislation reaches local government through national legislation.

The EU imposes no legal instruments related to the organization and functioning of local government. Each country defines the organization of local government in accordance with its nature and interests, provided that the government is close to the citizens and public service is provided to the citizens everywhere they live.

However, European legislation has direct consequences on local units and brings additional costs that they have to face due to its implementation; for example, electronical public procurement originally represents the cost of IT infrastructure and training of staff, but saves money from the transparent process that is followed. The e- procurement in Albania was well introduced in 2015 with the law on public procurement.

We responded to difficulties of the municipalities and communes concerning a lack of IT infrastructure, trained staff and a lack of knowledge on the process. We provided extensive trainings, regional or tailor-made to every local government unit.

The approximation of EU legislation for countries like Albania aims at improving the rules of free competition, the removal of barriers to the free movement of goods and services, gradually increasing the standards in different areas, such as environmental protection, food safety and animal health protection, etc.


Chapter 2: Local government associations and municipalities in Albania

With respect to the approximation of laws and regulations, today we have a Law on Local Self-Government with specific elements that push municipalities to move forward in the EU integration: there are two articles in this law that oblige municipalities to have an office of public information and an office for EU issues. As associations, we delivered know-how products such as an ABC of the EU for local government, an ABC of public administration public, as well as manuals for inter-municipal cooperation.

The legal implications of the EU membership extend to certain own functions of municipalities.

The environment is one of the areas considered as “more protected” in European legislation, with a total of 200 “European laws”. Albania has adapted some laws in the field, such as waste and water management: Under the Albanian law on local government, waste management is a competence of local government itself. Of course, the policy-making function and regulatory function to protect the environment by processing operations and waste management are mainly competences of the central government through institutions created specifically for this purpose. Some EU directives in this area have a direct impact on local government: Regarding the Landfill Directive (Directive 2000/76 / EC), Albania is currently in the process of approximation of legislation in this area, which means the gradual approximation to the above standards in the construction and operation of landfills.

Considering the Waste Incineration Directive (directive 2000/76 / EC), Directive 2000/76 / EC regulates the processing of waste through incineration. Its aim is to limit the negative consequences on the environment and especially the liberation in water, soil, surface and underground water (and associated risks on human health) from the process of incineration and co-incineration of waste.

Relating to the Directive on Packaging and Packaging waste (Directive 94/62 / EC), one of the typical types of waste is “waste from packaging”. Specifically in this field, European legislation (Directive 94/62 / EC) defines recycling quotas (in %) of packaging waste as well as quotas for each recycled material.

What have the associations done? I would like to mention the Manual on Inter-Communal Cooperation and its trainings as the waste management in Albania should have a regional approach. I would also like to mention the work of the Association of Municipalities with NALAS and ORF MMS in three municipalities (Lezha, Shkodra and Vau i Dejes, which have one landfill) on a regional approach towards improved waste management.

Water as a component (albeit not the only one) of the environment is an area covered by a large number of European directives, such as Directive 2000/60 / EC Directive drinking water (98/83 / EC), Directive for waste-water / sewage (91/271 / EC) and Directive on waste-water / sewage (91/271 / EC). The approach is called to be a “combined approach” due to the inclusion in European legislation of two standards: standards for water


quality and standards to limit the emissions into the water. Management of the supply of drinking water and processing of urban waste water (sewage) is also one of own functions of local governments in Albania, and this year Albania has improved the legislation on water supply companies, which is in compliance with the EU directives and strengthens the role of the municipality.

European legislation in labour relations: as mentioned above, local governments are also important local employers, with the respective administrations as well as services in their responsibilities or companies that they own. The EU has adopted significant legislation in the field of labour relations, the implementation of which may affect local units in their capacity as employers.

Work continues, challenges remain present and the road is still long.

The EU is both near and far!


Branislav MISOVIC

EU integration before getting candidate status – the role of local governments and the association in the Republic of Srpska, Bosnia and Herzegovina

Bosnia and Herzegovina – along with other Western Balkans countries –was identified as a potential candidate for EU membership during the Thessaloniki European Council summit in June 2003.

Since then, a number of agreements between the EU and Bosnia and Herzegovina have entered into force, including visa facilitation and readmission agreements (2008) and the Interim Agreement on Trade and Trade-related issues (2008).

The Stabilization and Association Agreement is defined as the primary framework of action in the process of accession of Bosnia and Herzegovina to the European Union, and it is a long-term strategic EU policy towards the Western Balkans. BiH signed a Stabilization and Association Agreement on June 16, 2008. The Stabilization and Association Agreement (SAA) has been ratified and entered into force on June 1, 2015.


activities of municipalities and cities in the

EU integration process

Activities of units of local self-government in Bosnia and Herzegovina in the EU integration process in the pre-acession stage are mainly related to the following activities:

▪ The application of laws and regulations that are harmonized with the EU acquis.

▪ Cross-border cooperation and the use of EU funds and programs for the strengthening of cooperation between regions.

▪ Strategic Planning: a standardized methodology for integrated local development planning (MiPRO) has been used and is fully compliant with the guiding principles that the EU promotes.

According to the provisions of Article 70 of the SAA, BiH has an obligation to provide a gradual harmonization of existing laws and future legislation with the EU (more than 60% will have a significant impact on local governments). The SAA is forecasted to ensure that current and future legislation is properly applied and implemented. The SAA provides that the harmonization of legislation extends to all elements of the EU acquis. Harmonization will initially be focused on the basic elements of the acquis: the regulations on the internal market, justice, freedom and security, as well as other trade-related areas. At a later stage, harmonization of the remaining regulations will be carried out.

Chapter 2: EU integration before getting candidate status

Another important segment for units of local government is crossborder cooperation. The development of cross-border cooperation in all areas of competences of local government units in accordance with the SAA is the main instrument through which the regional development policy is implemented, aiming to equalize the level of development of the region.

Many municipalities and cities in the Republic of Srpska recognized the importance of the EU integration process at the right time. In this regard, special organizational units dealing with EU integration process have been established: departments or single positions have been formed within LSGs depending on the size of local government units. In the Republic of Srpska, the cities of Banja Luka and of Bijeljina have great experiences in this field. Many of the units of local self-government also established local development agencies, while currently the main goal in the process of EU integrations is to raise the capacity of local governments for the use of EU funds and programs including project design and implementation for the purpose of local development.

As for the all EU accession countries, the EU funds were mainly available through the Instrument for Pre-accession Assistance (IPA). Its goal is to prepare candidate countries and potential candidates for use of EU structural funds when they become full members.

After the first phase of IPA implementation (2007-2013 period), in the period from 2014 to 2020 the European Commission has established IPA II, which allows more flexible access to financial support focused on the socio-economic and regional development, employment, social policy, education, the promotion of equality and human resource development as well as agriculture and rural development.

A special focus of the EU is placed on the development of regional and territorial cooperation: for applicants from the Republic of Srpska, there are three programs of cross-border cooperation (CBC) and three transnational cooperation programs available: CBC Bosnia and Herzegovina – Montenegro, CBC Serbia – Bosnia and Herzegovina, CBC Croatia – Bosnia and Herzegovina – Montenegro as well as Danube Transnational Programme, Adrion and Mediterranean Transnational programmes.

There are also programs of the EU at disposal: Erasmus plus, Horizon 2020, Europe for Citizens, Creative Europe (with sub-programs Media and Culture) and in the final process of ratification a program of support for small and medium enterprises (COSME) will hold particular interest.

Activities of the association of municipalities and towns of the Republic of Srpska in the EU integration process

The RS Association is a member of international organizations such as the Congress of Local and Regional Authorities of the Council of Europe (CLRAE), Council of European Municipalities and Regions (CEMR), and the Network of Associations of Local Authorities of South-East Europe (NALAS).


Chapter 2: EU integration before getting candidate status

As an association of local authorities representing their interests in front of the central government, the association of municipalities and towns provides the opportunity to local authorities in a more organized and efficient way to be involved in the process of EU integration.

The first significant activity of the association in the process of EU integration was signing of a Memorandum of Understanding between the Directorate for European Integration, the Associations of Municipalities and Towns of the Republic of Srpska (AMTRS) and the Federation of Bosnia and Herzegovina and the Netherlands Development Organization (SNV) to encourage the development of cooperation and to strengthen ongoing efforts in the European integration processes with an emphasis on mutual communication through the exchange of relevant information in the process of EU integration. The memorandum defines that the units of local government will be prepared to improve their capacity to provide public services in line with EU standards and principles, including the capacity for absorption of pre-accession funds available for further socioeconomic development.

In the previous period, the Committee for International Cooperation and European Integration of the Association had been established and activated. The relevant committees – and thus the Committee for International Cooperation and European Integration – have a wide range of activities, including laying the basis for a dialogue with the central government, helping and supporting cities and municipalities, cooperating with partners and donors and undertaking actions in relation to the professional and the general public.

From 2010, the representatives of AMTRS have been included as members of the Joint Monitoring Committee (JMC) of individual Cross-Border Cooperation programs (Croatia – Bosnia-Herzegovina, Serbia – BosniaHerzegovina, Montenegro – Bosnia and Herzegovina).

Furthermore, the strategic development plan AMTRS for the 2015-2019 period defines the establishment of new units (training unit and unit for EU integration). This is the basis for the realization of this important task. These units are engaged in tasks that will facilitate access to the use of EU funds to the AMTRS members by providing timely information, as well as the transfer of knowledge and skills related to the preparation and implementation of projects. It is planned that the EU unit will be able to develop the necessary knowledge and skills for the preparation and implementation of projects, as well as specific skills necessary for the promotion and introduction of new practices in the municipalities, as is the case with energy efficiency.

In August 2012, the Memorandum of Understanding between the Government of the Republic of Srpska and AMTRS was signed, where there is a framework for activities in the field of reforms and further development of local self- government by defining specific mechanisms to establish a modern European model of local self-government. The cooperation goals in the framework of the memorandum are:

▪ Establishing mechanisms for cooperation between national authorities and local authorities as a prerequisite for mutual coordination of interests


and efficient institutional dialogue in the implementation of activities to improve local government, but also the overall policy of the Republic of Srpska.

▪ Encouraging and providing conditions for the reform and further development of local self-government in accordance with the objectives of the European Charter of Local Self-Government.

▪ Enabling the full implementation of the principle of subsidiarity by ensuring the rights of citizens to direct participation in public affairs at the local level.

While in the process of EU integration the National governments have the primary role and they are the ones who are the decision-makers regarding the definition of the policy of EU accession – it does not mean that local governments have less important tasks and obligations. Local government units through the joint actions and work within the Association can contribute to more efficient fulfillment of the criteria for EU membership.


Chapter 2: Influence of the Montenegrin local governments and association


Influence of the Montenegrin local governments and association in the EU integration processes


As a result of decentralization and increased responsibilities of the municipalities, local governments are expected to effectively deliver public services, improve the quality of life of citizens and provide a favourable business environment that will foster investments and employment, i.e. they are expected to be the key players in ensuring a balanced and harmonious sustainable development.

They are also expected to be actively involved in the European integration process of Montenegro and to introduce EU standards and best practices at the local level.

Therefore, it is very important for the central governments to recognize that the process of European integration is necessary to be communicated, accepted and implemented by the entire society, starting with central authority and local authorities to civil society organizations and citizens.

On the other hand, it also appears that EU institutions are underestimating the role of local self-government in preparing for EU integration. For example, in the EC’s Progress Reports for Montenegro local government is hardly mentioned, which is also the case with the EC’s Enlargement Strategy and Main Challenges 2014-15. Local government dimension should thus be more included in strategic and operational planning for EU enlargement.

The experience of the new EU member states has shown that the preparation of local governments should not be ignored and delayed for the last stage of integration, because then there is insufficient time for all the preparatory activities and the training of municipal employees for the new tasks and responsibilities arising from the EU acquis. Only if there are parallel preparations at the local level with the preparations at the national level will the necessary knowledge be adequately and timely adopted at the local level.

Current phase in Montenegro’s EU accession process

Montenegro submitted an application for EU membership on December 15, 2008. On December 17, 2010, the European Union granted Montenegro the official status of candidate country

The accession negotiations with Montenegro were opened on June 29, 2012.


As of June 30, 2016, 24 negotiating vhapters – including the rule of law Chapters, 23 Judiciary and fundamental rights, 24 Justice, freedom and security, have been opened, out which two Chapters (25 – Science and research and 26 Education and culture) – have been provisionally closed. Opening benchmarks have been set for eleven chapters.

From the beginning of the process, the Union of Municipalities of Montenegro (UoM) and its members have been involved in the structure for negotiation with the EU, such as member of the working groups 13Fisheries, 14-Transport Policy, 19-Social Policy and Employment, 22Regional Policy and Coordination of Structural Instruments, 28-Consumer and Health Protection. Upon the initiative of the UoM, the local governments will also be involved in working groups for negotiation chapters that are of the highest importance for local governments, i.e. 5-Public Procurement, 11-Agriculture and Rural Development, 15-Energy, 16-Taxation and 27-Environment.

UoM is also an active member of the Operational Body for the implementation of the Strategy for Informing the Public about Montenegro’s Accession to the European Union 2014-2020

Although some improvement in consultation process is evident, further implementation of functional bottom-up approach is needed. The needs, constrains and challenges of local governments in EU integration process should be adequately taken into consideration, especially regarding the planning of appropriate time frame for elaboration and execution of integration strategies and EU standards implementation.

It is still necessary to implement more inclusive consultation processes at all stages of planning, programming and decision-making on all issues affecting local government, taking into account specific role, tasks and responsibilities of local governments, which are different from other local actors (i.e. private and civil sector). It is often the case that the local government is not perceived separately from the civil society and the private sector, and it is considered that the participation of NGOs in an activity is sufficient although the issue holds strong importance for the local government and it is within its responsibility.

Joint Consultative Committee between Montenegro and the Committee of the Regions

The cooperation between the Union of Municipalities of Montenegro and the EU’s Committee of the Regions in the framework of the Joint Consultative Committee (JCC) has strengthened the institutional component of cooperation with the European Union within the Stabilization and Association Process.

The Joint Consultative Committee is established with a view to promoting dialogue and cooperation between the regional and local authorities in the European Union and the local governments in Montenegro. Strengthening dialogue and cooperation between the EU regional and local levels of


Chapter 2: Influence of the Montenegrin local governments and association

government with local authorities of Montenegro is helping the country to be prepared for more efficient implementation of the acquis.

It is important to enhance local government capacities to perform competences arising from EU accession through transfers of know-how from EU local governments on impact of EU legislation at local level and implementation of enhanced tasks, duties and responsibilities in provision of public services to local community actors or stakeholders, and JCC proved to be a good platform for addressing these issues.

The first meeting was held in Brussels in November 2012. Since then, six more meetings have been held, addressing the most important issues for Montenegrin local governments such as debate on action plans for local self-government reform debate on annual enlargement packages, environment, agriculture and rural development, absorption capacities at the local level, human resources management at the local level, etc.

In the previous period, two joint reports were prepared, namely “Increasing absorption capacity of EU pre-Accession funds and improving administrative capacity at the local level in Montenegro”, adopted in December 2013; and “Scope for interregional and transnational cooperation, including cross-border cooperation and EGTCs”, adopted in June 2016. These reports were communicated to the Committee of the Regions and the central government and local governments in Montenegro.

At the 5th JCC meeting held last year in Cetinje, the UoM’s initiative Network of Municipal Project Managers was introduced, and ist importance was fully acknowledged in the JCC’s Joint Report “Scope for interregional and transnational cooperation, including cross-border cooperation and EGTCs” where one of the recommendations was related to the Network stating that “it is needed to further strengthen the Network of Municipal Project Managers as it may have a significant role and importance in future implementation of EU projects at local level, regional development and preparation for EU structural funds”.

Network of Municipal Project Managers

From the 2014-2020 financial perspective, Montenegro is receiving financial support from the EU through the Instrument of Pre-Accession Assistance (IPA), which has been designed to assist candidate and potential candidate countries to better align their systems, policies and standards with EU acquis.

In recent years, Montenegrin municipalities have gained significant experience in preparation and implementation of EU-funded projects. However, there remains a need to further capacitate and coordinate local governments in management of EU funds. After accession to the EU, a large part of the ERDF and Cohesion Funds will have to be utilized by the local authorities with their investments portfolios.

In Montenegro, there are no regional authorities, meaning that intermunicipal cooperation is crucial for regional development and implementation


of EU projects of regional importance, with the support of the national authorities. Given the size of Montenegro and its small number of municipalities (23), the network of municipal project managers with experience in the implementation of EU projects is an efficient way to exchange experience, use the existing knowledge and quickly implement partnerships necessary for the successful use of available EU funds.

Having this in mind and to contribute to the EU accession processes and facilitate use of structural and cohesion funds in the future through active participation in programming process, provision of expert advice to colleagues from local governments or other actors active in the field of local development, as well as implementation of joint inter-municipal actions and cross-border projects, the Union of Municipalities of Montenegro (UoM) established the Network of Municipal Project Managers Network of Municipal Project Managers acts as a single hub point of inter municipal cooperation to facilitate absorption of EU funds at the local level. Integration of the Network of Municipal Project Managers with other UoM’s initiatives (Knowledge centre, working groups, etc.) contributes to achieving sustainable enhancement of human resources and absorption capacities in sub-national level of governance.

The main tasks of the Network of Municipal Project Managers are the following:

1. To assist the UoM Secretariat in programming of EU funds in Montenegro and represent the organization in relevant national and international events and bodies related to the topic.

2. To initiate and implement project ideas for municipalities.

3. To raise capacities through permanent exchange of information and experiences, and provide expert support to all municipalities in preparation and implementation of projects.

In the past 12 months, the network has provided significant support to local governments in Montenegro, including the organization of series of trainings on preparation and implementation of EU-funded projects (for over 100 municipal employees), assisting the municipalities in identifying project ideas and establishing partnerships for the opened calls for proposals, organization of info days on opened calls for proposals for municipal secretariats, companies and institutions, etc.

It can be stated that in the recent period much has been done in capacity-building of local governments to use EU funds. Experience gained and established partnerships with international partners are a good prerequisite for the active participation of our municipalities in the newly-opened crossborder and transnational EU cooperation programs, as well as other EU programs.

However, when it comes to the capacity of local governments in Montenegro to absorb EU funds, the main challenge that they encounter is prefinancing of the EU projects

In fact, for the realization of projects in a large part of these programs, local governments have to pre-finance 90% of the funds, namely they need to pre-finance project activities from their own resources until they


Chapter 2: Influence of the Montenegrin local governments and association

get refund by the EU, which can take up to a year in a regular procedure. Considering the difficult financial situation of the majority of Montenegrin municipalities, pre-financing of projects imposes a great burden for their budgets.

To overcome this challenge, the Union of Municipalities has submitted the Initiative to the Government of Montenegro to establish a financial instrument to support local self-governments in their efforts to prefinance EU projects. This initiative relates to the establishment of a revolving fund that would be used to provide short-term loans to municipalities to prepare and implement EU-funded projects. Once reports are approved and EU funds received, local self-governments would be obliged to repay the loans to the Fund, which would then be used to pre-finance new projects. The establishment of the revolving fund for local selfgovernment would substantially increase local self-government’s capacity to use grants from EU funds.

In conclusion, municipalities have an important role to play in contributing to the country’s course towards European integration, although to overcome the challenges and achieve encouraging results local governments need wider support from both the central government and EU.

This support could be summarized in following recommendations:

1. To include the local government dimension in strategic and operational planning for EU enlargement.

2. To enhance local government capacities to perform competences arising from EU accession through transfers of know-how from EU local governments on impact of EU legislation at the local level and the implementation of enhanced tasks, duties and responsibilities in provision of public services to local community actors or stakeholders.

3. To implement more inclusive consultation processes at all stages of planning, programming and decision-making on all issues affecting local government taking into account specific role, tasks and responsibilities of local governments which are different from other local actors (i.e. private and civil sector).

4. To support local governments to access available EU funds and ensure pre- and co-financing of municipal projects through establishment of the financial instrument, which would support local governments in preparation and implementation of the EU-funded projects.


ZELS role regarding a better absorption of EU funds for the municipalities

The decentralization in the Republic of Macedonia encompasses a transfer of a number of competencies from the central to local level, thus giving new powers but also new responsibilities to the local selfgovernment. This entails competencies in urban planning, environment, pre-school, primary and secondary education, LED, HR, social services, primary health services, culture and others. Given the existing human resources in the municipal administration and the scarce funds that do not match the needs, the decentralization overstressed the capacities of the local self-government units.

The implementation of decentralization was carried out in two phases: the 1st phase transferred limited resources to the municipalities starting on July 1, 2005, while the 2nd fiscal decentralization phase introduced block grants, given by the central Government to the local management by the municipal authorities, starting from January 1, 2008.

As an association of the units of the local self-government, ZELS is fully dedicated to the well-being of all 81 municipalities in the Republic of Macedonia. It is based on two main pillars: strengthening the capacities of municipalities and thus the overall decentralization process in the Republic of Macedonia; and strengthening independent institutional capacities of ZELS as a service provider to the municipalities to secure legal base of quality and effectiveness of the local authorities as direct service providers for their citizens and continuously to accomplish and practice their competences.

The confirmation for the results accomplished, providing recognition to ZELS as being on the right path in achieving its goals was given in the first published Report of the Joint Consultative Committee between Republic of Macedonia and European Union (EU), represented by the Committee of the Regions (CoR), which “welcomes the significant work undertaken by ZELS in representing local authorities towards central government and internationally, in its considerable accomplishments in capacity building of local civil servants and introducing e-governance initiatives in municipal public administration, and urges to share this experience”, as well as welcoming “the concept of creating a financial institution of municipalities that will service timely and adequate financial receivables to local authorities for continuous and smooth implementation of EU’s projects by the units of local self-government (ZELS Bank of Municipalities)”.

This recognition had been confirmed by the Plenary Assembly of EU CoR and stated in the Opinion on the Implementation of the Enlargement strategy 2014-2015, where in the country part for Macedonia is stated: welcomes the work carried out by ZELS, the Association of Units of Local Self-government, in representing the sub-national level in the


Chapter 2: ZELS role regarding a better absorption of EU funds for the municipalities

Republic of Macedonia. The text of the Opinion was presented by Rapporteur prof. Franz Schausberger (AT/EPP), delegate of the Region of Salzburg to the Committee of the Regions, which was unanimously adopted by 112 members of CIVEX (Commission for Citizenship, Governance, Institutional and External Affairs) and by the Plenary Assembly of Committee of Regions on the 111th session held on April 16-17, 2015.

The confirmation for the results accomplished was explicitly emphasized in the Country Progress Report 2009 published by the EU, where it was stated that the ZELS overall work makes the association a leading actor in the decentralization process in the Republic of Macedonia.

Besides overall successful achievements, ZELS specifically identified interests and needs of the municipalities in the area of capacity-building of local authorities in searching, developing and management of projects derived from EU financial programs.

The EU funds directly used by the municipalities are settled in the second component of IPA funds - Cross-Border Cooperation (CBC). The legal basis for utilization of IPA 2007 - 2013 expired in 2014, and the start of new IPA 2014-2020 was accompanied by several informative events for introducing the basics for operation of the new pre-accession instrument. The first IPA II CBC calls for proposals were opened with Bulgaria, Greece and Albania. IPARD Program (IPA 5th component) remained an EU fund for municipalities. From 2016 onwards, Balkan-Med Program has been opened for municipalities on consortia principle between five countries (Macedonia, Greece, Bulgaria, Albania and Cyprus).

According to the results of the ZELS survey on utilization of EU-funded projects, the main obstacles in preparing and execution of the EU-funded projects are overwhelmed technical and administrative procedures, a lack of capacity for project preparation according to the EU standards and a lack of own funds to participate in the projects. For example, seven projects were submitted by municipalities of 115 in total in the last Call for Proposals in CBC 2007-2013 with Albania (31 Macedonian municipalities had right to participate), whereas only three were awarded the grant. This shows that the participation of the municipalities in EU-funded projects is insignificant and that the capacities for absorbing EU funds by municipal administrations remains at a low level. Additionally, municipalities as eligible entities for IPA CBC program have to compete with other national and international organizations in winning the projects. As an association of municipalities, ZELS has taken a stand not to apply and compete in this program to avoid being in a competitive position with eligible local authorities in securing the projects under IPA CBC Program.

The ratio of received and rejected projects is 50-50, as the ZELS survey on utilization of EU-funded projects showed. According to the survey, the municipalities expect from ZELS assistance in: providing training to local administration, securing information on opportunities for European funds and direct assistance in project development.

ZELS Training Center (ZTC) organized trainings and coaching sessions for the municipal representatives working on the preparation of EUfunded projects. The training curricula referred to the utilization of IPA CBC


projects, separately for each partner neighboring country, for advantages and challenges in the IPA CBC 2014-2020, new program possibilities (HORIZON 2020, Community Led Local Development-CLLD), on process of developing project’s idea to submitted application, project management on EU funds with an emphasis on the projects’ applications, common specifics (cost-benefit analysis, the application of PRAG rules and getting informed on possible financial sources) and implementation phases. The municipal representatives had coaching sessions with the international expert Jurij Kobal in two rounds: first, on developing and preparing projects’ applications; and second, on projects’ implementation.

In cooperation with the European Commission Delegation in the Republic of Macedonia, ZELS included municipalities in TAIEX Study Programs organized in Brussels. Approximately 12 to 14 study programs had been organized in the areas of public procurements, good governance, children’s rights, gender equality, cultural heritage and tourism, entrepreneurship, regional policy, rural development, social inclusion, water management, urban mobility, employment, support for people with disabilities, nature protection, waste management, local budgets and financing, EU structural funds, energy efficiency and renewable energy resources. This program (for 2011-2014) provided the participation of approximately 40 employees from the municipal administration per year.

Weak coordination between the stakeholders involved in the utilization of the EU funds for the Republic of Macedonia, lack of knowledge, skills and experience in the absorption of EU funds by municipalities, low level of experts’ knowledge in the municipal departments for development and managing of the EU projects were the reasons for ZELS to initiate and develop a new approach to overcome these challenges addressed by the members. Based on the strategic sub-goal “Support in the utilization of Pre-Accession EU Funds”, ZELS increased the realization of the activities under this strategic orientation. A separate document had been developed which has imposed ZELS’ new method with measures for a coherent and comprehensive preparedness of municipalities to absorb EU funds available for the Republic of Macedonia. A municipal project pipeline has been created under these measures.

Providing timely information on events, open calls for proposals, communication with the Delegation of EU in RM on behalf of municipalities and with relevant state bodies, as well as with the associations of municipalities in the neighboring countries then providing outsourced expertise and capacity-building activities are some of the types of support that ZELS provided to the municipalities. Regular information on possible EU financial programs and announcements on calls for projects in IPA CBC were shared with municipalities, as well as documents. Assistance in creating projects and finding partners were also offered to the municipalities. Constant circulation of information, knowledge assistance and supporting investment fund has been presented as a successful story of supporting municipalities in utilization of EU funds, as shown by the general conclusion of a shadowing program realized between ZELS


Chapter 2: ZELS role regarding a better absorption of EU funds for the municipalities

and the colleagues working on EU funds in the Association of Municipalities of Bulgaria.

ZELS has strategic policy towards the municipalities in attracting EU funds for their benefit. The challenge to develop this fundamental string remains in the focus of the core activities.

ZELS and the city of Skopje have opened a Liaison Office in Brussels since November 2010. The main activity of the office is direct communication with EU institutions, disseminating information on EU funds eligible for the municipalities and logistical and organization support to ZELS’ members in establishing contacts with interesting parties and promotions.

A Joint Consultative Committee between Republic of Macedonia and European Union – represented by the Committee of Regions (JCC) – has held 12 meetings, organized and logistically and financially supported by ZELS. The first JCC Report on the possibilities and instruments available to local authorities to support the accession process - a focus on territorial cross-border cooperation was produced, which summarizes commonly harmonized positions with emphasis on crossborder and territorial cooperation. The JCC Report has been conceptualized in 41 statements distributed in seven sub-topics.

ZELS has its own delegation that participate in the work of the Congress on Local and Regional Authorities of Council of Europe. Annually, ZELS immensely contributes in the preparation of the progress achieved in the decentralization process in the Republic of Macedonia, as a part of the country report published by Council of Europe.

As a member of the NALAS (Network of Associations of Local Authorities in SEE), ZELS participates in the work of NALAS’ EU Network, with efforts to elevate to a higher level of quality, quantity and efficiency its own national performances towards the municipalities in Macedonia.

One of ZELS’ core activities is representation of the municipalities before the central government, the EU institutions and other international bodies and organization by building partnership relations. In this context, ZELS has engaged in several activities:

▪ Nomination and participation in the working group/bodies within line ministries responsible for managing IPA funds to represent municipal needs and positions.

▪ Coordination with the municipalities on possible changes in the procedures and measures for development of the programs.

▪ Holding coordination meetings with other centralized institutions on status of application, development, management of IPA funds by the municipalities and detecting challenges (systematization of open issues, organization and dissemination among municipalities).

▪ Preparation of materials for forums and workshops between the municipalities, the responsible ministers and MA/EU Delegation/ CFCD.

▪ Dissemination of the information among local self-government to overcome the challenges, and facilitates the coordination between involved institutions.


Engagement of domestic and international experts and consultative support to the municipalities during development of the EU projects, is secured through:

▪ Assisting municipalities in preparation process of the project proposals.

▪ Advisory support in the preparation process of the tender documentation for the public calls, project implementation.

▪ Securing experts’ support in the municipalities.

▪ Organizing meetings of the ZELS’ network on municipal employees working on EU projects.


Chapter 2: The role of the Standing Conference of Towns and Municipalities

The role of the Standing Conference of Towns and Municipalities of Serbia (SCTM) in the EU integration

History of the SCTM activities

Local governments (LGs) are becoming increasingly important actors within both the European Union and in the candidate countries in the process of EU integration. Moreover, the majority of EU legislation is implemented directly or indirectly at the local and regional level in the Member States. The quality of its implementation is also important, which is the direct responsibility of local government to the national and EU level, as well as to citizens. Serbian local government units have the same role.

In order to fulfil this, it is extremely important to perceive local government as a key holder of the implementation of EU legislation and policies and as playing a key role in the success of the accession process in general.

Local governments must have sufficient institutional, administrative, financial and technical capacity to successfully implement EU standards at the local level, which indicates the necessity of reform and construction. This includes knowledge of the key European standards in a particular field (such as the environment, energy efficiency, public procurement, etc.). They have to monitor activities at national level, particularly the flow and outcome of the negotiating process, negotiate with the national authorities in terms of financing of the implementation of standards, as well as monitoring, preparation for and the use of available EU funds and programs to implement relevant projects. They must be proactive and act in a timely manner, in particular through their national association, which has mechanisms for articulating the differences between local governments and can represent their interests and needs before the central government.

In previous years, the SCTM has been actively working on strengthening the role of local governments in the process of European integration, as well as prepating them for the process and membership in the EU. The SCTM has a complex role in the EU accession phase and its responsibility is extensive.

The SCTM developed strategic approach emphasizing the role of LSGs in the EU integration process.

After many years of EU integration activities that the SCTM was implementing in cooperation with European sister organisations, the Programme document in area of EU Integration and International Cooperation was adopted in 2009 at the General Assembly, as the comprehensive review of the state of play in this area. This document analyses the situation, identifies problems and proposes solutions. In 2010, based on this document, the roadmap for the preparation of LSG units for the EU Integration


process was adopted at the General Assembly, highlighting the role of the association, policies and measures that it should take at the national and international level to help rapprochement and training for LSGs in taking over tasks that follow. The roadmap envisaged new strategic documents that needed to be adopted by the SCTM in this field. The strategic plan 2011-2013 recognizes support to the LSGs in the EU integration process –and especially accession negotiation process – as one of the key SCTM objectives. Finally, in 2013, the framework document on impact of EU integration process on LSGs in Serbia was adopted at the General Assembly as a strategic, legal and policy framework that determines the influence of the EU accession process to the LSGs and SCTM and defines their role and recommends further activities to be undertaken. From this period, all activities in this area present implementation of this document.

The SCTM developed internal structure to better implement objectives from its strategies and policies regarding EU integration.

For many years, a Committee for International Cooperation existed and worked in different EU topics. It was changed into a Committee for EU Integration and International Cooperation in 2008, as a working body which prepares proposals, initiatives, opinions, decisions and advises to the Presidency in this area. The Council for EU Integration was also a working body of the SCTM Presidency active in this field, comprising members of the Presidency. The Working Group for EU Integration was formed from the employees interested in this area, implementing different activities. The SCTM established the Unit for EU Integration and International Cooperation in 2008, with two working positions to be a permanent part of the organization structure. In 2016, the unit added one more position because of the workload. When the process of EU accession negotiations started, the SCTM formed the Internal Coordination Mechanism for Support of the SCTM Participation in the Accession Negotiations, comprising a presidency, committees and expert networks, working groups for every chapter, representatives in national negotiation groups and a team for support to the SCTM’s participation in the negotiations within SCTM secretariat. It assumes that its participation in the negotiation process is a horizontal issue and that all bodies and sectors in the secretariat should deal with it. It serves for the creation of policy proposals and opinions on different issues on the agenda of national negotiation groups. Accordingly, the work within the SCTM has been regulated in more efficient way. In this sense, the first working group for support to the SCTM participation in the negotiation chapter 27 environment was established and is functional.

SCTM initiates and improves cooperation with relevant stakeholders at the EU level.

At this point, the most important form of cooperation with EU institutions lies in cooperation with the Committee of the Regions, which allows local and regional authorities of the EU candidate countries to participate in the work of the committee before the entry of their country into the EU. Cooperation with the Committee of the Regions and the SCTM began in June 2006, with the presentation of local government system in Serbia at the


Chapter 2: The role of the Standing Conference of Towns and Municipalities

second meeting of the Working Group for the Western Balkans, which was formed within the RELEX Commission (Commission for External Relations and Decentralized Cooperation, now CIVEX Commission). The SCTM representatives participated in the past in the meetings of the Working Group, which contributed to establishing closer contact with the CoR. The SCTM tried to provide support to local authorities in Serbia in the process of EU integration and involvement of our local authorities in the projects and initiatives implemented in the EU, through the exchange of experience, information and good practices in this group. As the Joint Consultative Committee between Serbia and the CoR was established in 2015 as a part of the implementation of SAA, the SCTM started to play important role as a body authorized to propose members of the JCC from the LSG units, as well as a deputy secretary of the JCC to the Ministry of Public Administration and Local Self-government. The SCTM participated in the first meeting of the JCC held in Brussels in 2015, participates in every meeting of the Serbian delegation in the JCC and provides consultative support in its work. The SCTM has been providing support to the participation of LSG representatives in open days in Brussels for many years, as well as through establishing contacts with the colleagues from EU and other countries.

SCTM organized visits of the LSG representatives to the different EU institutions (EC, EP) to present interests of LSGs from Serbia, as well as presenting findings of the analytical process regarding impact of the EU legislation to LSGs in different negotiation chapters. During post of the SCTM employees in Brussels, within the preparation of the feasibility study for opening the SCTM office in Brussels, many contacts and relations were established with the representation offices of LSGs, regions, as well as their associations. The SCTM has been an official member of the Council of the European Municipalities and Regions (CEMR) since 2010, participating in the work of the policy committee and other working bodies, meetings of the secretaries general, providing support for its representatives, providing data and consultancy in the preparation of studies, policy papers and other CEMR activities.

SCTM cooperates continuously with the Delegation of the European Union to Serbia (EUD) regarding the implementation of different EU-funded projects and programmes and makes contributions to the yearly progress reports for Serbia. For several years, the SCTM has conducted a preselection of candidates for the Local Administration Facility (LAF) program for participation of LSG representatives within TAIEX in cooperation with the EUD.

SCTM developed dialogue at the national level regarding the role and importance of LSGs in the EU accession process and positioned itself and LSGs as important partners in this process.

SCTM’s role here hold strong importance because as an association of all cities and municipalities in Serbia it should present a rounded political position of local government, based on an analysis of their capacities and needs and to be consulted by the central government in this process.

European Integration Council was established in 2002 and reestablished in 2007 as the highest body responsible for providing strategic


guidance and political support of the EU accession process before the SAA entered into force. The SCTM president was a member of this body ex off, participated in meetings of the Council and contributed to its work.

When the SAA entered into force in 2013, and especially when negotiation process was opened in 2014, the national institutional structure for EU integration process was changed and the SCTM had to adjust. The SCTM started to advocate local self-government interests in this complex process towards the national level in a more serious way. This requires a continuous and productive communication with local self-governments, a corpus of specific and technical knowledge in different domains of existing and future competences at the local level. SCTM has to demonstrate capability and dexterity in the intensive negotiation process in which EU and central authorities of the candidate country are main actors, promote and protect the interests of local self-government: the level of the government that will implement the major part of the regulations under negotiations and through which the citizens – as end users – will feel the effects of the EU integration process. The success of the negotiation process depends on the quality of negotiation positions, which have to involve the readiness of LSGs to take over responsibility to implement EU standards regarding competences, capacities, resources and time frames. Only the SCTM can advocate agreed policy positions of all LSG units towards the national level in this process.

The SCTM identified 21 negotiation chapters that influence LSGs. On several occasions, the SCTM prepared and sent different initiatives to the national level regarding the necessity for inclusion of the LSGs and the SCTM in the negotiation process

The SCTM also prepared different analysis of impact of the EU accession process to the LSGs in Serbia to indicate the consequences and influence of accession on the competences and capacities of LSGs in certain negotiation chapters. These analyses (twelve to date) provide insights about how the process of adopting EU standards affects local government, deadlines to implement such a change and institutional, human, financial and technical capacity needed to implement these standards. Analyses and their findings and recommendations were submitted to the analytical team of the negotiation team of Serbia for accession to the EU and are available to all negotiating groups. After this, the SCTM had numerous meetings with the national level, especially with the Negotiation team and Chief Negotiator for inclusion into the work of the negotiation groups. The result at present is that the SCTM representatives are participating in fo7r negotiation groups (regional policy and coordination of structural elements, environment, social policy and employment and public procurement), representing the interests of LSGs and policy positions. Moreover, there have been two meetings of the chief negotiator and all mayors organized, where they have been informed on different topics like the role of LSGs in the negotiation process, negotiation chapters’ influence on LSGs, the IPA financial perspective 2014-2020, dynamics of the negotiation process, etc.


Chapter 2: The role of the Standing Conference of Towns and Municipalities

SCTM has been included in the process of programming of IPA funds from the beginning in various forms. First, as an observer in the programming of national IPA, the SCTM consulted LSGs regarding financing priorities in the form of workshops and forums until 2013, when it became formal part of the sector working groups for planning, programming, monitoring and evaluation of the national IPA. The SCTM was especially involved in the programming and implementation of CBC programmes, in the working groups/task forces for programming and planning and then in the joint monitoring committees in monitoring and evaluation process. Regarding IPARD, the SCTM informs and educates LSGs. It also initiated and prepared – together with the Ministry of Public Administration and Local Self-government – a document arguing for the need to establish a system for pre- and co-financing of LSG projects funded by the EU.

At the initiative of the SCTM, the creation of a legal basis for LSGs to deal with the process of EU integration has been proposed as an amendment to the Law on Local Self-Government prepared by the Ministry of Public Administration and Local Self-Government.

SCTM provides support to the capacity development of LSGs for taking over obligations from Serbia’s EU accession process.

It is necessary to provide maximum support in all segments of local governance in the process of applying EU standards and policies in the EU accession phase, which usually means the amendment of regulatory frameworks, a higher level of competence and stricter monitoring of the fulfilment of commitments. SCTM began presenting the results of analysis in 2013 and then continued in 2014 and 2015 to municipalities and cities in Serbia, organizing different forums and meetings. SCTM has been conducting trainings and workshops for LSGs regarding different EU topics (institutions, lobbying, preparation and implementation of EU-funded projects, EU procedures, etc.) and since 2013 new topics have been included: accession negotiations, EU standards in different negotiation chapters (energy, state aid, social policy and employment, financial control, rural development, etc.), IPA II – new budget perspective, etc.

Moreover, for many years the SCTM has been trying to promote and support the introduction of position for monitoring the process of European integration in towns and municipalities in Serbia, the so-called EU officer or EU office. The SCTM has prepared a study defining the position of an EU officer in the structure of LSG, setting the precise lines of communication and accountability to the management of LSG and external stakeholders, such as the SCTM, central, provincial institutions and European organizations and institutions. The document contains a proposed job description of this position in the LSG, as well as the proposal for the necessary qualifications to carry out these tasks. Monitoring of the negotiations, monitoring the work of the EU institutions, programs and funds, introduction to the EU acquis, training and education of local government employees in terms of European integration, preparation and analysis of LSG capacity to absorb and implement the EU standards, informing local decision-makers on major developments in the EU accession process, establishing communication and cooperation with the SCTM and other major holders of EI process are


just some of the needs and the reasons for their establishment. Different models of institutional mechanisms for EU affairs in LSGs in Serbia were presented to LSGs during 2013 and 2014, with models supporting local legal acts for its implementation that were offered to LSG for use. In 2015, this position was included in the Model Statute of LSG and Model Rules on organisation and job classification of LSG administration, which has been proposed to LSGs for adoption.

On the other hand, the SCTM also represents a main partner to the EU in the process of implementing different projects and programmes at the local level. The SCTM adopted this role immediately after 2000, when the realization of the community assistance programme for LSGs started to solve urgent problems related to the provision of heating (“Energy for Democracy”), reconstruction of schools and kinder gardens (“Schools for Democracy”), health institutions and for preparation for infrastructure investments (“Cities for Democracy”). In December 2000, within the SCTM a special office was established for the logistical support to cities and municipalities in communication with the Delegation of the European Commission in connection with the implementation of a package of emergency assistance from the EU to local communities in Serbia. There were several programmes financed by CARDS and IPA that were implemented by the SCTM (solely or as a partner), dedicated to the reform of the legal, strategic and institutional framework for LSG in Serbia, support to the decentralization process and implementation at the local level (CARDS funded Introducing Code of Conduct for Local Officils, MSP - IPA Eastern Sebia, Strengthening Local Governments in Serbia 1st and 2nd phase, etc.) or funded by other donors regarding capacity-building of the LSGs or SCTM (Establishment of the network of EU officers in pilot Serbian cities, Support to the SCTM in Serbia: Roadmap for EU Integration). In 2005, an exchange programme started and lasted until 2015, finishing in the fourth phase, within which more than 20 million EU was channeled towards LSGs to support decentralization, build LSGs’ capacities in accordance with EU standards and improve LSG services towards citizens and companies. Through this programme, 148 projects of LSGs were financed through the grant schemes from 2005 to present in different areas such as establishment of citizen service centers, offices for youth and local economic development, establishment of the system for primary waste selection, development of spatial and urban plans and GIS, emission of municipal bonds, property management, etc. Besides grant schemes, programmes supported the development of local strategies and methodology, a unique list of priority infrastructure projects for financing, the SLAP database as an instrument for programming and planning of EU and other international aid, fiscal decentralization and the introduction of programme budgeting, as well as building capacities.

SCTM was also working to raise awareness on EU integration at the local level through the different publications on the topic of EU integration and publishing articles in this field, through an EU web page, an e-bulletin that has contributed to improving the understanding of the process of EU integration and the role of local government in this process among local stakeholders.


Chapter 2: The role of the Standing Conference of Towns and Municipalities

Program: Support to serbian municipalities on the road to EU accession: Enabling high-quality services, stakeholder dialogue and efficient local administration (2015-2019)

The program aims to support and further prepare Serbian municipalities for EU accession through improving conditions for high-quality services, enhancing dialogue with stakeholders and enabling more efficient local administrations in accordance with the principles of good governance and gender equality. This four-year program is funded by Sweden (through the Swedish International Development Cooperation Agency; Sida) and implemented by the National Association of Local Authorities (SCTM) in Serbia in partnership with the Swedish Association of Local Authorities and Regions (SALAR).

This program relates to the achievements of the previous Swedishfounded program ‘Support to Local Governments in Serbia in the EU Integration Process’ (December 2011 – September 2015), although the overall approach and intentions shifted to more concrete and direct support to Serbian municipalities. During this new stage of Swedish support to Serbian municipalities, SCTM and SALAR are envisaged to provide specific municipal support packages to selected municipalities in concrete areas, as well as supporting local administrations collectively at the policy level

Hence, the program concentrates on two areas of work:

1. Hands-on support for services to citizens and business (municipal support packages) to selected municipalities with a focus on:

a) Environmental protection and services

b) Improvement of the business climate at the local level

c) Improved prevention and management of emergency situations at the local level.

A municipal support package (MSP) is a set of activities tailored to local needs and designed to help selected municipalities to solve a particular problem or achieve a key local policy goal. These packages are envisaged to assist selected local authorities to upgrade concrete performances, improve capacities and provide services in an innovative, efficient and sustainable way, harmonized with EU standards. Support packages include hands-on engagement from relevant experts in specific fields as well as trainings, coaching, workshops, seminars and other types of direct support, foreseen to be provided to selected municipalities that meet certain program criteria.

2. Support for SCTM and municipalities collectively at the policy level to represent local interests and enhance the capacity of all local authorities, with a focus on:

a) Environmental protection

b) Improvement of business climate at local level

c) EU integration and international cooperation

d) Gender equality


e) Improved prevention and management of emergency situations at local level

f) Capacity development and sustainability of SCTM.

While in the first component the program focuses on direct support to a limited number of selected local authorities in the areas of environment, business climate and emergency management, the second program component is envisaged to serve as a vehicle of improvement of local government sector in Serbia in the above, as well as the areas of European integration and gender equality. This is to be achieved through support to local authorities in implementing laws, providing arguments for SCTM advocacy work aimed at improvement policies and legislation, improving cooperation with national and EU institutions, and raising the levels of administrative efficiency of local authorities to respond to needs of businesses and individuals.

The overall program places a special emphasis on two cross-cutting issues, namely gender equality and good governance (including transparency and anti-corruption), which are expected to be promoted throughout all program activities with specific activities and results where appropriate.

It is expected that by 2019, with the influence of this program Serbian municipalities will be better prepared for EU accession, with improved service delivery, enhanced dialogue with stakeholders and more efficient and transparent local administrations, in accordance with the principles of good governance and gender equality.

What could be transferred to other countries, lessons learnt, sustainability of the results and future steps planned

What could be transferred to other countries?

Having in mind that the SCTM initiated participation of its representatives in the negotiating groups for the accession negotiations, it was necessary to prepare analysis of the impact of European legislation and policies on local governments to prepare high-quality positions of local governments and the SCTM, which will be represented in the negotiating groups, particularly in the following negotiation chapters: 5. Public procurement, 8. Competition policy and specific analysis related to the field of state aid, 11. Agriculture and rural development, 12. Food safety, veterinary and phytosanitary policies, 14. Transport policy, 15. Energy, 19. Social policy and employment, 22. Regional policy and coordination of structural elements, 23. Judiciary and fundamental rights, 27. Environment, 32. Financial control, and 20. Enterprise. Analyses offer insights into the resources, capacities and capabilities of LSGs to actively and equally participate in the implementation of EU regulations that have already been transposed into national legislation and the acquis communautaire, which will become part of the legal system of the Republic of Serbia in the process of accession


Chapter 2: The role of the Standing Conference of Towns and Municipalities

to the EU, in the areas of particular interest to local governments in Serbia and corresponding to the negotiating chapters.

The essence of the analysis is to demonstrate how the process of adopting EU standards affect the local government, in what time frame it is possible to implement such change and EU standards and which institutional, human, financial and technical capacity are needed to implement them. Accordingly, using the results of the analysis in their work to create policy positions advocated by representatives of SCTM, negotiating groups at the national level will have a clear picture of the situation at the local level. On this basis, they can create a better negotiating position of the state towards the EU.

The SCTM is the first national association in the Western Balkans to have conducted this analytical process. It truly reflects the consequences of the implementation of the acquis at a local level, thus persuading the national level to take it into account. These analyses are now part of the database used by analytical team of the negotiation team at the national level. Other associations can use our experience and start to work on this even before opening of negotiations or during screening process. This will give them space to prove themselves to the national and local level as experts whose positions are based on thorough analysis.

Lessons learned

On the other hand, there are several issues that should be taken into account by association when representing and supporting LSGs in the EU integration process:

▪ It is important to start to work with LSGs in the very beginning, explaining to them all phases of the EU integration process, effects and consequences, as well offering solutions for building capacities, using funds and advocating towards thw national and EU level.

▪ LSGs are hungry for information on EU topics, especially developments in negotiation process and EU funds, whereby associations should constantly communicate and inform LSGs on important issues.

▪ Key messages towards LSGs should be simple, clear, based on reality and using facts.

▪ It is necessary to strengthen preparations of LSG members in different delegations in EU institutions, organizations and networks for them to have synchronized approach and positions.

▪ It is good to show LSGs examples, good and best practices of their counterparts in EU countries, take them to study visits to the EU institutions as well as to other LSGs.

▪ It is important to support LSGs in developing twining and partnerships relations abroad.

▪ It is crucial to support LSGs in dialogue with civil society and private sector to make the implementation of EU standards easier.

▪ It is important to work with LSGs on communication of the EU topic towards citizens in local communities.


▪ LSGs are often interested in individual and tailor-made approaches (individual trainings, support to LSG unit, its public enterprises and institutions).

▪ Local government associations (LGAs) should develop strategic approaches towards their positioning in the EU integration process to be well prepared and organized.

▪ It is necessary to improve communication and cooperation between different sectors of LGAs in this process, to have clearly divided responsibilities with a common approach towards external partners and especially the national level.

▪ LGAs have to build internal capacities to establish a special mechanism or structure within LGAs based on sinergy.

▪ At the same time, associations have to be reliable partners at the national level, especially to the country’s or regional missions in Brussels, monitoring and reacting to important questions in the course of the process.

▪ They should build alliances with the civil and private sector in the country.

▪ They should build partnerships and learn from LGAs from EU countries, especially their representation offices in Brussels.

▪ Associations should be active in EU organizations (CoR, CEMR, Congress, etc.) and identify new partners in this field to learn, share, network and advocates for LSGs, as well as preparing projects.

Sustainability of the results and future steps planned

By establishing internal coordination mechanisms for support in the negotiation process, the SCTM secured that the results of its work in this field will be used in the future period. This structure should be increasingly functional and can work even after joining the EU. Results of the analysis will be used in everyday work of the LSGs by their employees in different departments. If they appoint an EU officer or establish an EU office, it will also have its role after the accession in the preparation of the projects and communication to the citizens. If legal basis is adopted by national level, we will have secured that LSGs can be part of this process in the long run. If the state establishes fund for pre- and co-financing of the EU-funded projects for LSGs, then they will use all acquired knowledge to use funds. The main concern for the SCTM is the financial sustainability, not just for the results in EU integration but also as a whole. During 2015, an analysis of the market possibilities was conducted and different options were described to provide sustainability for the SCTM work as such. Based on these results, the political bodes will decide upon the best option to go to the market.

Regarding future steps in area of EU integration, it is planned to provide more support to the LSGs in this process, build their capacities for implementation of EU standards through different trainings, workshops, model acts, guidelines and capacity-building for use of IPA funds and EU community programmes. The later are now being opened for Serbia and LSGs are very interested in participating. We will also support the establishment of EU officers and offices, their capacity-building and networking. There will be


Chapter 2: The role of the Standing Conference of Towns and Municipalities

two approaches, namely one towards all LSGs and tailor-made approaches regarding work with individual LSG. Communication with LSGs through re-designing existing and establishing new communication tools will be improved. More attention will be paid to the quality preparation and capacitybuilding of the LSG representatives at the EU level, as well as hosting foreign delegations and representatives of EU organisations in Serbia.


Frédéric VALLIER

Frédéric VALLIER

CEMR experiences and support to local government associations in the EU enlargement

In close cooperation with the Austrian Association of Cities and Towns, the Council of European Municipalities and Regions (CEMR) has addressed the issue of cooperation with South-East European local government associations several times in the last decade.

As President of CEMR (2005-2010), the mayor of Vienna, Michael Häupl, devoted special attention to the situation in the neighbouring countries in South-East Europe. Some of these countries were applying for membership to the EU, while others were looking for support in the development of local and sometimes regional democratic structures.

In October 2005, a first CEMR seminar on local and regional authorities in South-East Europe took place in Vienna, bringing together the associations of local and regional governments from the region for a discussion on the potential contribution of CEMR in their support, as well as ways of developing the exchange of experiences among associations.

Three years later, in November 2008, the city of Vienna hosted another conference organised by CEMR and the Austrian Association of Cities and Towns and financially supported by the Austrian Development Agency on “South-East Europe – Meeting the Challenges”. The objective was to have an exchange on key challenges for local government in the region (e.g. finances, urban development, energy, etc.) and consider the future of South-East Europe from a broader European perspective, including preparation of EU membership, cooperation and twinning.

At that time, several countries and territories had suffered from divisiveness, wars and ethnic cleansing, although across the region the essential process of preparation, reconstruction and reform at all levels was well underway. However, a huge amount remained to be done to consolidate peace and development and achieve full integration with the rest of Europe. Therefore, the development of strong, effective and democratic local government structures was considered essential.

Furthermore, CEMR’s cooperation with the Network of Associations of Local Authorities of South-East Europe (NALAS) was formalized by approving mutual associate membership between the two organisations in 2008. This allows representatives of both associations to participate in the governing bodies and relevant activities of the other, thereby providing opportunities to improve synergies in our work.

In the context of the CEMR Policy Committee meeting in Berlin in November 2009, a seminar was organised in cooperation with the German section (RGRE) on “1989, a new Dawn for Democracy in Central and Eastern Europe - 20 years after the fall of the Berlin Wall and the success


Chapter 2: CEMR experiences and support to local government associations

of the Solidarność movement, what lessons, what legacies for local and regional government”. Most speakers shared their personal experience how they had to struggle to put an end to communist rule imposed on their countries, which was quite impressive as some of them had been in prison. The role of the national associations of local and regional government –which were rapidly established following the events of 1989 – and how their action and voice have developed since was also addressed. As a side event, CEMR held an exhibition of old newspapers mainly from Poland, Germany, Romania and Czechoslovakia, covering the rise of Solidarność, the fall of the Berlin Wall, the flight of Nicolae Ceaușescu and the rise of Václav Havel and Civic Forum.

The following year, secretaries general and directors of CEMR member associations held a debate during their meeting in Kyiv on “CEMR and our partners on the ground in Central/Eastern Europe – building partnerships, promoting local democracy”. Speakers underlined the importance of pursuing joint initiatives, with the Congress of Local and Regional Authorities of the Council of Europe and NALAS, including to optimise resources. The representative of the Association of Ukrainian Cities emphasised the importance of such partnerships for local self-government in his country where the situation is not easy, particularly regarding finances. He highlighted the importance of projects that the association is implementing in cooperation with the Polish and Norwegian associations, and underlined the usefulness of CEMR projects such as providing comparative studies and data.

In May 2013, CEMR’s Thematic platform on European Union enlargement with the Standing Conference of Towns and Municipalities of Serbia and the committee “Enlarged Europe” of the French Association of the Council of European Municipalities and Regions (AFCCRE) organised a joint conference on “The role of decentralised cooperation in the EU integration process” in Belgrade. The topics discussed included the European perspectives of the Western Balkans, best practices for local and regional decentralised cooperation, existing frameworks and tools for international cooperation of local and regional governments as well as a selection of concrete examples and best practices based on case studies from FrancoSerbian decentralised cooperation.

The topic of South Eastern Europe was again addressed in the context of the CEMR secretaries general and directors meeting in Budapest on October 27, 2016, where a debate took place on “Towards an enlarged Europe – what is the role of local and regional governments in the European Union and Western Balkans relations?”

Zorica Vukelić, deputy secretary general of the Standing Conference of Towns and Municipalities of Serbia, presented the situation of local governments in the Balkans, reflecting its difficulties given that decentralisation is stale and the financial pressure is high. She called for more support from the EU Member States and the CEMR member associations to assist the local government associations in developing their capacities. Relationships between twinned cities could be re-activated, but funding for these activities is needed. Local government cooperation should cover a broad


range of topics, including energy, environment, climate, migration, refugees (need for coordination at local level, also in the wider European context); social, gender, e-learning, distance learning, etc. She proposed preparing an action plan for cooperation between CEMR and the associations, organising a project to help for preparation of membership, connecting the experts from CEMR with the experts of NALAS (CEMR website), the exchange of knowledge, search for experts, study tours and exchanges. NALAS representative, Boran Ivanoski, confirmed the interest in cooperation and stated that many associations consider CEMR as an important source for information. It was regretted that there was no financial support provided by the EU for cooperation available anymore, but CEMR – together with its partners – should advocate the EU institutions for the re-establishment of a budget for local government cooperation.



Christiane Breznik is working for the City of Vienna in the Department of European Affairs as the Head of Unit for International Cooperation. For over 15 years, she has been responsible for representing the regional level in INTERREG programmes and managing the transnational programme CENTRAL EUROPE. Ms. Breznik holds a degree for Landscape Planning of the University of Natural Sciences in Vienna and a Master in Public Administration of Harvard University, Kennedy School of Government.

Agron Haxhimali is the Executive Director of the Association of Albanian Municipalities (AAM). AAM is an LGA operating in Albania that was established 17 years ago and has as members the municipalities of Albania. Mr. Haxhimali graduated in Biology and Chemistry and holds a Master Degree in Public Administration. He has more than 20 years of working experience at the local level, is the author of different studies and publications in the field of Local Government and is engaged as an expert on strategic planning, financial management, e-government, local economic development and decentralisation, communication and territorial administration.

Klemens Himpele was born in 1977 in Emmendingen/Germany. He studied economics at the University of Cologne, where he graduated in 2005. He started his professional career as an educational researcher in Cologne and Berlin. Subsequently, he worked for Statistics Austria in Vienna and the German Education Union (GEW) in Frankfurt am Main. Since 2012, he is the Head of Vienna’s Municipal Department 23 - Economic Affairs, Labour and Statistics.

Natasha Ilijeva-Acevska is dedicated to social development and decentralisation in South-East Europe. She has a hands-on experience in the decentralisation of governance since 2003, specialising in fiscal decentralisation, municipal investments, financing decentralised education and social protection services. Ms. Acevska supported the fiscal decentralisation agenda in NALAS (Network of Associations of Local Authorities of South-East Europe) in the 2010-2017 period, when she co-designed the framework for monitoring fiscal decentralisation performed annually as a collective regional effort. Since spring 2017, she has been working at the UNDP Country Office in Skopje, managing the Innovative Solutions for Improved Access to Services at Local Level project dealing with social services and intermunicipal cooperation. She holds an M.A in European Integration and Communication and a B.A. in Economy and Business Management from the St Cyril and Methodius state university in Skopje.

Michaela Kauer is the Director of the Liaison Office of the City of Vienna in Brussels. The focus of her work lies on strong public services and innovative urban policy. Since 2016, she is the coordinator of the Urban Partnership on Affordable Housing, a new working model of the EU aiming to better involve cities in EU decision-making. Her academic background is in international public management, whereby she regularly publishes and gives lectures.


Gennadiy Kosyak, currently Deputy Head of Good Governance Department, DG Democracy at the Council of Europe and – among others – is in charge of the Council of Europe projects in the area of good governance and local government reform in the Eastern Partnership countries, Western Balkans as well as bilateral cooperation projects between the Council of Europe and its member states. As an international lawyer by background with a specific expertise in legal approximation, human rights and rule of law, good governance and public administration reforms, Mr Kosyak previously also held high-ranking positions in the national civil service and has sound international cooperation experience.

Michael Kremser studied Business Management in Vienna and Milan, as well as Political Science and History in Vienna. After a few years in the private sector, he has been working for the finance department of the City of Vienna since 2003. Since March 2012, he has been Head of the Department of General Finance and Tax Affairs at the Municipal Department 5 –Financial Affairs. His main tasks include revenue sharing (Finanzausgleich), public-private partnerships (PPP) with particular regard to Maastricht compliance (ESA 2010) and financial project support.

Ivana Lazic works with cooperation programmes since 2005. Main interest and fields of expertise are providing support to Interreg and IPA CBC programmes on various implementation issues. She has a degree in Spatial Planning. Since March 2017 she is a Coordinator of Interact Office Vienna.

Heidrun Maier-de Kruijff is the Secretary General of the Austrian Association of Public and Cooperative Economy [Verband der Öffentlichen Wirtschaft und Gemeinwirtschaft Österreichs (VÖWG)]. Mrs. Maier attended the University of Vienna and completed her diploma studies in Politics, History and Law in 2002. Subsequently, she gained practical experience working as legal staff focusing on commercial and insolvency law. Additionally, she completed a year of legal clerkship. From 2004 until 2009, Heidrun Maier took up the function as office manager for Mr. Hannes Swoboda (Member of the European Parliament) in Strasbourg and Brussels, primarily dealing with energy and foreign policies.

Branislav Misovic is currently the Head of Unit for EU Integrations and International Cooperation at the Association of Municipalities and Towns of Republic of Srpska. For the past 8 years, he has been working on tasks related to international cooperation and EU integrations. Mr Misovic graduated from Canadian York University with a specialised honours degree in Kinesiology and Health Sciences. He also holds a degree in Physical Education from the University of East Sarajevo.

Irena Nikolov was employed at ZELS as a Training Advisor from March 2007 until November 2016, implementing capacity-building activities for municipalities, preparing the training programmes and curricula for trainings within the ZELS Training Center (carrying out needs assessments, templates, modules, etc.). As a Project Coordinator, she was responsible for the implementation of projects in the area of transparency, as well as

Biographies 166

accountability and gender-responsive policies and budgets at the local level. Ms. Nikolov is a trained knowledge multiplier on EU integration and the utilisation of EU funds.

Mauro Novello is coordinator of the Joint Secretariat of the Interreg IPA CBC Italy-Albania-Montenegro and responsible for the smooth functioning of the secretariat, while supporting the Programme Managing Authority, the Joint Monitoring Committee as well as the beneficiaries in their work. In the previous 11 years, he led the Interact office in Vienna providing advice and support to all Interreg programmes in Europe in partnership with the Member States and the European Commission. Before that he managed several Interreg projects, just after his studies in Law and Business Management.

Janine Prantl is the Legal Policy Officer at the Austrian Association of Public and Cooperative Economy [Verband der Öffentlichen Wirtschaft und Gemeinwirtschaft Österreichs (VÖWG)]. After obtaining her Bachelor’s degree in Comparative Literature at the University of Innsbruck, she has continued her legal studies at the University of Vienna. At present, she is completing the third and final cycle of the diploma programme, focusing on the fields of European and Public Procurement Law.

Oliver Prausmüller is Policy Advisor on International Trade at the Chamber of Labour Vienna, Department for EU and International Affairs. His work areas include the impact of trade agreements like “GATS” or “TiSA” on public services. Additionally, he is an external lecturer at the University of Applied Sciences BFI Vienna and an editorial board member of the Austrian journal “Kurswechsel”.

Thomas Prorok is Deputy Managing Director of the Austrian-based KDZ Centre for Public Administration Research. For more than 15 years, he has been working in the field of Public Administration Reform, Decentralisation and Local Governments as well as EU Integration. He is also head of the Austrian CAF-Center, the European system for quality management in the public sector. He studied European Law, holds a Master degree in Political Science from the University of Vienna and is an editor of manifold publications on local governments, quality management and European integration, including the “LOGON Report impact of European Union on Local Authorities”.

Joachim Roth joined NALAS in October 2015 as an integrated expert of the German International Cooperation (GIZ/CIM). His tasks are centred in the EU positioning of NALAS. He has more than 20 years of professional experience with an emphasis on democratisation and descentralisation processes, good governance and state modernisation working for the German International Cooperation and EU institutions in Europe and Latin America. He holds an M.A. in Political Science from the Technical University of Darmstadt, Germany, a postgraduate degree in Law and Political Science and a Ph.D. in Law from Aix-en-Provence University in France.

Biographies 167

Alexandra Schantl is senior expert and team coordinator for European Governance and Urban Policies at the KDZ Centre for Administration Research in Vienna. She has 20 years of working experience in the field of European Integration and EU Funding and Financing, being – among others – head of the “Europe Direct Vienna” EU citizens’ information office at the Vienna Business Agency before joining the KDZ in 2008. She has been a lecturer for various international organisations and institutions including the Council of Europe and the University for Applied Sciences BFI in Vienna. Furthermore, Ms. Schantl is Honorary President of the European Federalists Vienna and a board member of the Urban Forum –Egon Matzner Institut für Stadtforschung.

Johannes Schmid is the Legal Advisor in the Austrian Association of Cities and Towns (AACT), the constitutional representative body of Austrian cities and towns for more than 100 years. Mr. Schmid attended the University of Vienna and received his doctorate in legal studies in 1995. For 10 years, he was head of the administration and legal advisor of a large city in the province of Lower Austria.

Ivana Serafimova is employed at ZELS as a Training Advisor and Head of the Training Center (ZTC) with responsibilities to manage capacitybuilding activities for the municipalities in the Republic of Macedonia. She has experience as a project coordinator of various projects implemented through ZELS (project preparation, project’s finances and budgeting, monitoring, activities execution, evaluation, reporting). Ms. Serafimova works in the field of European integration and the utilisation of EU funds in the context of local self-government, as a coordinator of the ZELS’ network of EU integration comprising local civil servants working on the preparation and implementation of EU-funded projects and a ZELS’ EU Officer at the NALS’ network. She is a trained knowledge multiplier on EU integration and utilisation of EU funds.

Claudia Singer is a Project Manager for the Coordination of Priority Area 10 “Institutional Capacity and Cooperation” (PAC 10) of the EU Strategy for the Danube Region (EUSDR). PAC 10 coordinates administrative capacity building and the involvement of local stakeholders in the EUSDR. Ms. Singer holds a degree in Political Science from the University of Vienna. She has previously worked in the field of European Territorial Cooperation at the Austrian Conference on Spatial Planning (ÖROK).

Marija Šošić provides expert support to public administrations and nongovernmental organisations in the use of EU funds, with a focus on EU external aid funding. She has 14 years of experience in planning and elaboration as well as the implementation of EU and other donor-funded projects, including grant scheme management, procurement, reporting, monitoring and evaluation. While working for the associations of local governments in South-East Europe (2004-2010), she was dealing with various aspects of the European integration of municipalities. As of 2015, she has been cooperating with KDZ on the capacity building of countries

Biographies 168

of the Western Balkans and the Republic of Moldova as a Local Government and Project Management Expert.

Vanja Starovlah was born in 1973 in Montenegro and she graduated in Economics. From 2005 to 2006, she was a member of the Council of Europe’s Committee of experts on democratic participation at the local and regional level. Since 2001, she has been working in the Union of Municipalities of Montenegro (UoM) and she is currently covering the position of Secretary for European Integration and International Cooperation, whereby she is responsible for establishing and maintaining contacts with international institutions and organisations, managing projects on the capacity building of local governments and acting as Secretary of the Committee for European Integration of the UoM.

Frédéric Vallier has been Secretary General of the Council of European Municipalities and Regions (CEMR) since 1 February 2010. Created in 1951, the CEMR is the broadest association of local and regional authorities in Europe. As an expert in European affairs at the local and regional levels as well as city diplomacy, Mr Vallier has over 25 years of experience working with local and regional authorities. He holds an Executive Master’s Degree in public management from Science Po Paris.

Monika Vana was born in Vienna, where she studied Economics and Administration Informatics at the Technical University. Since 1995, she has been active for the Green Party as a Municipal Councillor and Member of the City Government in Vienna (2001-2014), as well as the Austrian Association of Cities and Towns. As a member of the European Parliament since 2014, she is Coordinator of the Committee on Regional Development and a Member/Substitute Member of the Committees on Budgets, Women’s Rights and Employment.

Aleksandra Vukmirovic is the Head of Unit for EU Integration and International Cooperation in the Standing Conference of Towns and Municipalities in Serbia (SCTM), the national association of local authorities existing since 1953. Mrs. Vukmirovic graduated in Law at the University of Belgrade, being active for more than 12 years in EU integration, EU law and EU funds, public policy, local self-government system, international cooperation, city twining, advocacy, project planning and management.

Simona Wolesa has a legal background and is currently Head of Office of the Austrian Association of Cities and Towns in Brussels. Her main task is influencing EU institutions in topics relevant to the local government level. She previously worked as a UN election observer with US and EU law firms, as well as an Assistant to MEPs.

Kelmend Zajazi is the Executive Director of NALAS, the Network of Associations of Local Authorities of South-East Europe since 2007. Mr Zajazi is a member of the Council of Europe’s Independent Expert Group on European Charter of Local Self Governments. Mr. Zajazi previously managed USAID Local Government Reforms and Democracy Network Programs,

Biographies 169


served as an Advisor and Chief of Staff of the Minister of Health and worked with the European Commission Humanitarian Aid Office in Macedonia. Zajazi is a Medical Doctor and holds a Master degree in Public Policy and Management from the University of Pittsburgh.


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