January 31st 2010

The crisis – time to defend Europe’s local governments

Last Thursday I was back in Brussels, invited by the European Parliament’s special committee on the financial, economic and social crisis. My mission – to highlight the really serious financial problems now facing Europe’s local and regional governments, just as growing un-(and under) employment make their public services ever more essential.

I gave them the key points of the November 2009 survey of national local government associations which CEMR had conducted. The results were overwhelmingly pessimistic… three quarters said things had got worse for their members (the individual towns etc.) during 2009, and about half thought they would get worse in 2010 – under 10%, mainly in Scandinavia, thought they would improve this year. Over two-thirds thought that councils’ budgets would reduce in real terms in 2010, and a similar proportion said their income had reduced substantially in 2009.

Moreover, the pressures on income and expenditure flowing from the crisis are in addition to the ongoing pressures from demographic change, especially the increase in the number of older vulnerable people.

And our big fear for the future is that, over the next few years, governments will seek to deal with growing public deficits and debt to GDP ratios by hacking local government funding.

I asked the committee to underline just how important the social protection role of local governments is, across Europe during the economic crisis, and to urge governments not to cut back their finances in a disproportionate way. Moreover, national governments should not use the crisis to reverse long-term policies of democratic decentralisation and use more top-down controls. And third, the EU itself – with a new Parliament, a new Commission – should support rather than hinder (as it has done) local authorities finding new ways to deliver services and become more efficient.

The European Commission has for years taken a hard pro-liberalisation ideological line towards public services, and has tried to use EU public procurement law to stop councils sharing front- or back-office services without first tendering them. Till recently, the European Court of Justice had seemed to back the Commission’s hard line, but last year, there were three decisions which gave a glimmer of hope that things are changing.

The first speaker in Thursday’s session was Mario Monti, who has in the past been Commissioner for the internal market and for competition, and is now asked by Manuel Barroso to report on how to meet the challenges facing the internal market. He argued, as expected, for the strengthening of the internal market, with a new emphasis on the social dimension – but to my surprise he also castigated Commission officials for wasting time and energy on tiny local government issues, e.g. by arguing that subsidies to municipal swimming-pools constituted illegal state aid under EU law!

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