28th Session of the Congress of Local and Regional Authorities of the Council of Europe

Focus: Local and Regional Democracy in Greece

Speaking notes by Artur TORRES PEREIRA, (Portugal, EPP/CCE) Congress member

25 March 2015

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·         This is the third report on local and regional democracy in Greece since the ratification of the European Charter on Local self-democracy by this country in 1989.

·         As you are all aware, since 2010 Greece experienced an exceptional situation, facing incredible difficulties in restoring fiscal and budgetary discipline, economic recovery and competitiveness and in reducing unemployment.

·         The commitments contained in the Memorandums of understanding in respect of local and regional authorities are numerous. They deeply affect the principle of local and regional government.

·         Greece’s obligation to reduce its overall public state deficit according to a very ambitious deficit reduction path, compels the central government to make important spending and revenue cuts, and territorial and administrative reforms of relevance to both the regional and the local level.

·         It was obvious that during the first years of the crisis, no serious consideration was given as to whether the Troika requirements with respect to local and regional authorities were consistent with the provisions of the Greek  Constitution, which guarantees local self-government, or with the basic provisions of the Charter. As we could understand during after all our meetings, the reform requirements based on the Memo of understandings were simply inevitable.

·         This being said, our role as Congress rapporteurs is mainly to reaffirm the need to comply with the constitutional provisions regarding local self-government, and with the Charter, even in such tough economic times. And this goes through a constant and structured dialogue between national, regional and local authorities, which became more than even absolutely indispensable to overcome together the severe consequences of the crisis.

·         Two major reforms deserve to be mentioned:

The Kapodistrias reform (1997): which reduced the number of municipalities (5775 to 1033 municipalities) this was done via mergers. However some issues remained such as the status of prefectures, and the status of the 13 administrative regions, as regional branches of the government.

Then, the Kallikratis programme which was launched in 2010, after having been presented to public consultation. A new law enacted in 2010, radically changed the structure and operation of local governance.

I would like to focus on the financial aspects:

·         It was clearly stated during our visit by all our interlocutors that local government revenues and expenditures are very low in Greece.

·         The already existing difficulties increased in the recent years. From one hand, Kallikratis reform improved the competences of local authorities that subsequently would need more financial resources; from the other hand, the unprecedented financial crisis and the related Memoranda of Understanding imposed severe austerity measures and important budgetary cuts throughout the public sector

·         The economic crisis had very heavy repercussions on the situation of local government in Greece. We were told that local and regional authorities have to “offer much more with much less”. 

·         And even if the Ministry of finances informed us that the financial result improved in 2013 compared to 2012 and the most significant reasons are the maintenance of their own revenues at high levels despite the economic downturn

·         Still, it remains that as a matter of fact, local authorities do not dispose of “adequate financial resources of their own, of which they may dispose freely”. In practice, decision-making and especially implementation of policies often depend on resources controlled by the State and not by local authorities.

·         Measures on local budgets have been introduced after Kallikratis, as a consequence of the financial crisis and in the framework of the Memoranda negotiated with the Troika. This refers especially to the Observatory for Financial Autonomy of the Local Government Organizations launched by a Law adopted in 2013 and further implemented by another Law in 2014.

·         The Kallikratis law provided that municipalities would join a “Special Economic Recovery Program”, when they face fiscal problems

·         Joining such a “recovery Program” could be voluntary, based on the decision of the Municipal Council. For Municipalities without access to credit market, due to the new restrictions imposed by the Kallikratis Law (see above) or/and strict borrowing criteria that gradually prevailed in the banking sector after the outbreak of the crisis, such “recovery Program” could, theoretically, be a bitter but necessary option

·         The Observatory was firstly established in 2012, by the new mid-term framework for fiscal strategy (MTFS) and it has been launched through Law 4111/2013 (Article 4). It is a Committee supported by the Financial Directorate of the Ministry of Interior and consisting of Fiscal Judges and high civil servants, while it also includes representatives of Local Government Associations (from the first and, respectively, the second tier)

·         The main role of the Observatory is to ensure the preparation of realistic and balanced budgets by local authorities. Moreover, the Observatory provides its opinion to the Ministers of Interior and Finance on the draft budgets.

·         We are perfectly aware that in the Greek context after 2010 – deeply marked by the financial crisis and by the subsequent international conditionality – a certain degree of centralized supervision, especially budgetary, over local government cannot be avoided.

·         However, at the same time we cannot avoid expressing our concern about the existing situation:  especially, we are a bit mistrustful with the delicate role of the Observatory, given the risk that its control is not kept in proportion to the importance of the public interests which it is intended to protect and that it undermines the local financial autonomy and especially the freedom of local authorities to determinate expenditures priorities.

My co-rapporteur Ms MOSLER TORNSTROM will pursue this presentation, so I stop here.