18th Plenary Session of the Congress

      Strasbourg, 18 March 2010

      Speech by Davor ZMEGAC, Rapporteur, Croatia (ILDG)

      Report on local democracy in Portugal

      Thank you Mr President,Dear colleagues,

      I will now present the information report on Portugal, which was unanimously approved by the Institutional Committee at its meeting on 12 October 2009.

      As explained by Mr Micallef, the fact-finding visit to Portugal was decided on the basis of a complaint from the National Association of Municipalities of Portugal, claiming that a new law on local finances did not comply with the European Charter of Local Self Government.

      As Rapporteur on Portugal, I went to Portugal in October 2008, accompanied by Professor Eivind Smith, consultant and vice-Chair of the Group of independent Experts, and by a member of the Congress secretariat.

      The aim of the visit was firstly, to assess the compliance of this new law on Local Finances with the relevant provisions of the European Charter on Local Self-Government, and secondly to provide information on the role of parishes (“freguesias”) with a view to determining whether it was appropriate for them to be represented in the Portuguese delegation to the Congress.

      Portugal signed the European Charter on Local Self Government on 15 October 1985, and ratified it on 18 December 1990. It entered into force on 1 April 1991.

      It was argued by the National Association of Municipalities of Portugal that Portuguese Law n°2/2007 on Local finance failed to meet the obligations deriving from the Charter, by violating the principle of financial security and stability of municipalities laid down in Article 9 of the Charter (and therefore, indirectly, failing to respect Article 3 of the Charter).

      During our visit, we met the President (and the SG) of the National Association of Municipalities, a city councillor of Lisbon, the mayor of Torres Novas, the President (and some auditors) of the Court of Auditors, the Secretary of State for Local Authorities, the Chairman of the Committee for budgetary and Financial Affairs of the Parliament and some academics.

      With the expertise of Mr Smith, I carefully examined the provisions of this new Law on Local Finances. You can find the details in the report, but I will give you an overall assessment of this Law which, in my opinion, does not infringe the Charter in any serious manner.

      Article 4 (1) and 5 (3) of the Law state that the annual budget law may make changes to the system of local finances relating to the level of financing and to the maximum debt. I do not think that one can reasonnably exclude all possibility of adjustments of the annual budget. This led me to conclude that there was no infringement of the Charter itself, although of course a lot will depend on how this power is used in practice. In any case, central government should guarantee local authorities a sufficient degree of stability in their financial situation.

      Article 4 (2) of the Law restricts the application of the principle of non-assignment by setting out broad provisions where it cannot be applied. Earmarking cannot be seen, in itself, as a violation of the Charter, and as I noted in my report, the measures taken in this respect in Portugal seem to be of minor importance.

      Article 5 (4) of the law states that municipalities which exceed the debt ceiling should be penalized by a reduction equivalent to the excess amount in the budgetary transfers due by the State in the following year. Once again, it cannot be deemed contrary to the Charter to limit municipalty’s maximum level of cash indebtedness to 125% of its total revenue. We did not notice that Portuguese municipalities generally have problems in complying with this maximum standards of indebtedness.

      I have outlined a few examples and unfortunately, I do not have time to go through all the provisions of this law, but you can find the details in the report. The assessment of the compliance of the Law was justified not only from the legal point of view but also from the practical information that we collected, during our meetings with specialised entities in this respect, on the situation in Portugal concerning the matters raised by the National Association of Municipalities of Portugal.

      The report stresses in its conclusion that annual budgets should not be used in a way that reduces the financial stability of local authorities, unless this is required by the overriding needs of the national financial system.

      I also think that it is important that central government pay greater attention to conducting consultations with the National Associations of Municipalities of Portugal and other central players.

      The Congress delegation’s overall impression of the Portuguese system of local finances remains more or less the same as that reflected in Recommendation 127 (2003) of the Congress. It may be worthwhile adding that this assessment is not primarily based upon the Republic of Portugal’s well-known need for reajusting its financial situation, but is rather based upon the general pattern of the Portuguese system, a pattern that does not seem to have been substantially altered since the Recommendation was adopted.

      Concerning the “freguesias” : There are 308 municipalities and 4,251 parishes in Portugal. According to the Constitution of Portugal, parishes and municipalities are classified as “local authorities”, with parishes on the same footing as municipalities. To my understanding, the system of “freguesias” reflects a long-standing tradition of organizing common affairs at the local level and is fully in line with the spirit and principles enacted by the Charter.

      Recommendation 127 (2003) on local and regional democracy in Portugal provides that representatives of Parishes should be kept informed and involved in the Congress activities. The inclusion of one representative of Parishes in the Portuguese delegation to the Congress firstly, reflects a reality of the territorial organisation of this country and secondly, is in line with Recommendation 127. I therefore see no problem with regard to the Charter regarding the representation of “freguesias” in the Congress delegation.

      My report concludes that Recommendation 127 (2003) remains valid as regards the situation of local democracy in Portugal. The report makes repeated reference to this text, underlining that its contents remain valid. In view of this, I felt - and the consultant Professor Smith was entirely in agreement with me on this - that there was no need of make a further recommendation to the Portuguese authorities.

      Thank you for your attention.

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