0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
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Europe Executive Summary
For several decades, the continent has seen a continuing, though sometimes uneven, trend towards greater democratic decentralization to the local and regional levels, as evidenced by the European Charter for Local Self-Government of 1985, which came into effect in 1989, having been ratified by all the European Union (EU), and almost all Council of Europe, member states. There is a rich array of intergovernmental fiscal settings in Europe, where countries are structured as unitary states, federations (Austria, Belgium, Germany and Switzerland) and quasi-federations (Italy and Spain), where the regional authorities enjoy comprehensive legislative, financial, and executive autonomy. The United Kingdom has a particularly interesting arrangement that could be described as asymmetric decentralization by combining a quasi-federal setting for Scotland, Wales and Northern Ireland with a unitary structure in England. Although rooted in history, European intergovernmental fiscal relations are far from immutable. European local governments have been hit hard by the global crisis that erupted in 2009 and the subsequent recession. Several EU countries have announced fiscal consolidation plans to restore long-term fiscal sustainability, which will affect local and regional governments through increased pressure for tax hikes and expenditure restraint, reduction in local revenue, and central transfers. Reform is ongoing in many countries, where local jurisdictional boundaries are being redrawn, as in Greece, Iceland, Latvia, Luxemburg and the role of intermediate or regional level of governments is being revisited, including in
France, Lithuania, Norway, Poland, and Sweden. Local governments will also have to deal with the emergence of new claims on local budgets, including in the areas of social protection in times of crisis and in a context of rapidly ageing populations. Demands associated with the need to integrate immigrants into the social fabric of the recipient countries also take a toll on local governments.
Luiz de Mello Economic Department, OECD4
Main issues and policy challenges for local government finance •
There is considerable variation in the assignment of expenditure functions to local governments in Europe
Cross-country variations in the relative size of local governments reflect differences in the assignment of expenditure functions across the various levels of government. Local government expenditure is comparatively high in relation to GDP and general government outlays in the Nordic countries [See figure 6]. In general, the expenditure functions of local authorities follow a “general competence” principle (enshrined in the European Charter of Local Self-Government), according to which local governments tend to focus on expenditures that are local in nature, so that the benefits of provision can be internalized by residents. In most countries, local governments are responsible for primary education, and in some new European Union Member States, such as Estonia, Latvia, Lithuania, Slovak Republic, and Slovenia, education alone accounts for at least one-third of local government budgets. Other
4. The opinions and analyses presented in this chapter are the author’s own and do not necessarily reflect that of the OECD or the organisation’s Member countries.