Abstract
The global financial crisis of 2008 has severely impacted the functions and operations of different levels of government in Europe—requiring costly bailouts from national or supranational levels in some cases. A typical adjustment has been reductions in wages and benefits at different levels together with harmonization of fiscal policies across the EU and control of general government deficits (involving all levels of government). This highlights the incentive and governance problems associated with fragmentation of government. Overlapping responsibilities and absence of full information prevent effective governance and yardstick competition.
The paper offers a review of the recent processes of structural reform of subnational government in a number of EU countries, such as France, Spain, Denmark and Italy. The purely economic side of reform, i.e., achievable scale economies, and the political economy of reform, and more precisely the institutional constraints, are highlighted. With the exception of Denmark, the restructuring of levels and numbers of government has proved difficult. Meaningful reforms must address assignments and own-revenue responsibilities and transfers, together with the political economy of institutional reforms. This has lessons for large multi-level countries, such as Brazil, China, Indonesia and in South Asia.
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Notes
- 1.
In Portugal, due to the Troika Memorandum, an administrative reform was carried out in 2012–2013, and reduced several small ‘freguesias’ (‘parishes’), from 4260 to 3092. This is the lowest layer of government. Initially, the MoU wanted to eliminate small municipalities as well (they correspond to 480), the ‘munícipios’ are the second layer. But this reform as been stopped due to local political resistance and it was then replaced by another political option: to create by law (new) municipalities’ associations covering all the Portuguese continental territory. In fact, they now correspond to regions equivalent to the EU’s NUTs III. In order to avoid overlapping problems, notably with the municipalities themselves, the law has given the associations powers in areas that typically involve ‘network management’, notably areas with high spillovers and or economies of scale (water supply, waste treatment, public transport, etc.), and that can be directly provided by intermunicipal governments or by enterprises (totally owned by the municipalities or with private capital as well). The next step—which might be challenged constitutionally—is to ensure that the governments of these associations (and of the metropolitan areas of Lisbon and Oporto) are directly elected (for the time being, they are chosen by and amongst the municipal leaders that are represented in the referred associations or areas).
- 2.
Ken Kollman (The perils of centralization 2013) develops a similar although distinct analytical path when he compares Westminster type democracies with presidential systems with reference to their effectiveness in preserving decentralization of government. Parliaments, when they have control of the executive and especially when they are elected according to majority (fist past the post) rule which establishes a strong tie with local interests, are resisting with more force the centralization push exerted by the central executive.
- 3.
www.gouvernement.fr/action/la-reforme-territoriale; Dumont (2014) and Amabile et al. (2015).
- 4.
See the government website www.gouvernement.fr/action/la-reforme-territoriale. Consolidation of Regions would also have led to a similar consolidation of the regional agencies of the central government (13 Regional Prefects are replacing the present 22).
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Ahmad, E., Brosio, G. (2017). Achieving Accountable Governance and Structural Reforms: Lessons from the Crisis in Europe. In: da Costa Cabral, N., Gonçalves, J., Cunha Rodrigues, N. (eds) The Euro and the Crisis. Financial and Monetary Policy Studies, vol 43. Springer, Cham. https://doi.org/10.1007/978-3-319-45710-9_18
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