IMPACT OF THE CRISIS ON LOCAL AND REGIONAL AUTHORITIES

The current economic and financial crisis is having severe effects on the local and regional authorities:

• Loss on investments
• Loss on tax revenues: The actual loss volume depends on the tax levied or shared by the local or regional government in the respective countries (personal income tax, company income tax, etc.) and the proportion of this income in total budget expenditures. Apart from immediate effects on the revenues, a mid-or long term impact is expected upon local and regional authorities. The direct effect may continue in the coming years due to expected lower consumption during the crisis and loss on income tax due to increasing unemployment. The general economic slowdown is also causing lower investments in construction and this will adversely affect the income from real estate tax.
• Lack of credits and high cost of borrowing: The requested volumes of credits are not available, or are only available at high cost, due to liquidity shortages on the market.
• Increased expenditure: Due to higher demand for social and welfare services as a result of shortage of income and loss of employment
• Cuts in local authorities' staff: Local and regional authorities are having to cut back on the number of employees in order to facilitate savings and decrease the personnel expenditure. This will aggravate the social situation.
• Reduced development: The crisis is affecting ongoing investments in infrastructure and development projects. The reduce rate of investments by both the public and private sector will result in a general slow-down of local and regional development.

More than ever local and regional authorities need to engage in lobbying with their governments or legislative bodies, since the role and interests of local and regional authorities are not necessarily taken into account at national or EU level when decisions are being taken on how to face the crisis.

The objective of the negotiations is generally to demand the government to:

• provide guarantees for local/regional governments in access to funding,
• provide grants to cover partially or fully the increased cost of funding (loan interests),
• provide extra grants to help balance the municipal budgets or cash flow,
• provide extra grants for, or to cover directly the co-financing requirements for EU funds,
• lift limits on municipal loans,
• increase local tax rates to secure income levels,
• introduce support programmes in view of growing unemployment,
• simplify public procurement regulations,
• simplify or adjust budgetary rules for municipalities to compensate for expected deficits.