Decentralization and development of modern local government systems in Eastern Europe

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Decentralization and development of modern local government systems in Eastern Europe

Decentralization and development of modern local government systems were fundamental components of transition in Central Europe. During this first decade of demolishing centralized states and unifying public services, various local government models were designed. Political mechanisms, economic systems, inherited institutions and management practices were restructured in these countries. Several shifts in objectives and modifications in the speed of changes characterized the long learning process of establishing new local governments. Ten years after the political transformation, this book is an attempt to assess the most important elements of local government systems, to present the similarities and differences in the existing models of eight countries of Central and Eastern Europe (CEE).

The country reports focus on the major components of decentralization and local government operation:

* legal and constitutional frameworks and structures of local governments;

* local politics, decision-making and internal organization;

* local government administration and service delivery mechanisms;

* fiscal issues and financial management.

Evaluation of local governments is based on some objective indicators, showing the progress of decentralization and level of local autonomy. At the same time a detailed description is provided on those issues that are important for countries with new local government structures. The primary topics for our analysis of legal frameworks are particularly the assignment of local government functions and the relationship between the traditional state administration and new local governments.

Local politics and decision-making mechanisms are embedded in the political institutions and culture of a given country. Besides traditional characteristics of local politics (elections, role of parties, et cetera) there are two aspects of local decision-making that are new for these countries. Local governments are faced with problems of ethnic minorities. Improved forms of representation, new methods of conflict management and the need for special services are parts of a local government's daily operation. Minority issues influence local governments on different scales, depending on the size and position of these groups. Another new phenomenon of local politics is the emerging form of the association. Joint local lobbying activities started to develop when municipalities realized the failures of the new party hierarchies and lack of efficient representation in central government decision-making.

Local service delivery experienced major transformation in the privatized economic environment. This has raised the claim for new local government administrative functions (control, monitoring), which required more professional personnel in municipal administration. In the field of local government finances, local and regional economic development are the main new municipal functions. In these countries with their relatively developed market mechanisms, local governments establish new forms of partnerships in service delivery and economic development.

The reports identify four major directions for further development of local government systems in these countries. After ten years of almost continuous changes public administration reform is still on the political agenda in most of these countries. Reports emphasize the importance of further decentralization of local government structures (as in Slovakia) or decision-making powers (as in Slovenia). The relationship between the functions of existing central public administration and the new municipal administrations are also subject to change. In countries involved in the European Union preaccession process the role of the intermediary level of government-regionalization-is a crucial issue (as in the Czech Republic, Hungary and Poland). The legal and administrative structure of large capital cities is also an important component of the planned reforms, as in these relatively small countries the nation's capital has an exceptional position (as in Estonia).

Parallel to systemic changes internal processes of local government operation are also important items on the reform agenda. Higher efficiency of local government services, improved management techniques or developing new rules of modern administrative ethics are primary objectives (such as in Estonia and Latvia). Several countries realized that further professionalization of local government staff and municipal service organizations is required for better service provision.

Local government finance reforms are almost constantly discussed in the countries of the CEE region. Earlier intergovernmental fiscal relations, especially concerning the system of transfers, were the focus of transformation. Now mostly the increase of independent revenues as the basis of extending local autonomy is the objective of the reforms. Suggested methods are more sophisticated; not only local taxation but also, for example, personal income tax sharing schemes are under development (this is the case in Estonia and Poland). In some countries property issues are still unresolved (as in the Czech Republic).

Local governance and management methods are also subject to change in this group of countries. Higher public participation, more transparent operation of municipalities and the establishment of direct contacts to citizens are high priority goals of reform (as in Lithuania and Slovakia). This requires further refinement of the legal position of elected leaders (as in Slovenia).

Hopefully this information will be useful to all of our targeted readers. Primarily the book is recommended for policy-makers and legislators who believe that the countries of Central and Eastern Europe have common roots and thus are able to learn from one another. Civil servants in ministries or experts advising members of parliament now are able to work with a group of consultants and think tanks. This common knowledge on specific characteristics of local governments in the CEE region is slowly incorporating work by academic researchers, for whom this book might provide comprehensive information on local governments. As the direct contacts between local practitioners (mayors, chief executives, finance directors) are developing, they could learn from the other countries addressed in this book.

Writing and editing this volume was a rather long process. We acknowledge LGI's steering committee, which initiated the work and contributed valuable advice on several professional issues. The authors of the country reports, together with the editor and the reviewers, presented this comprehensive information, which hopefully will be appreciated by the readers. Tamás M. Horváth, the editor of the book, made particularly important contributions not only in discussing the draft papers, but also by summarizing the major trends in his introductory chapter. The first project manager at LGI was Sharon Cooley, and later, Ondrej Simek, who provided administrative support for this publication. Christine Zapotocky helped us with copyediting. We are very grateful for their contributions and work.

Reform of local government is an essential part of the transformation of political systems. It is an element of basic political change, as well as a condition of and contributor to economic development. Restitution of property and the introduction of various forms of privatization are very important to the creation of new market institutions. The grouping of countries selected here for investigation seemed to be practical due to the similar level of economic transition they have reached, though direct conclusions on the quality of public administration and local democracy thus far cannot be drawn based on this characteristic alone. Thus, this introduction hopes to provide a normative basis for the following country-by-country descriptions.

As quoted so often, the introduction of political transition was very rapid. Poland took almost ten years; for Hungary, ten months was enough; in East Germany, ten weeks; and in Czechoslovakia, ten days of "velvet revolution." The key contextual factor of course was the waning of the Soviet Union's influence. After the political upheavals of 1989 and 1990, all of the countries in the group addressed economic and other systemic bases for the transformation with various levels of intensity.

The political process has been continuous in the overwhelming majority of these countries. Therefore, western involvement has had crucial effect, including influence on the choice of models for building democratic systems. However, a new, nearly unprecedented model of and framework for integration has become increasingly attractive in these countries- namely, towards a "western-type Europe." Escape from former bonds has not seemed to hinder the pursuit of new opportunities for cooperation. Nowadays the common foreign policy objective among the countries discussed here is the desire to join the EU. The components of such strategy affect particular areas of internal policy as well.

The introduction of a new democratic and plural model at the local level was very important as the first step of transition. The European Charter of Local Self-government summarized the minimum requirements for preparing and establishing new institutions, which promoted the widely accepted essence of such development from both a structural and legal point of view. Most of the countries in this region realized the importance of adaptation to these principles and signed the charter in the mid-1990s, affirming the desire to follow the West European tradition of local governance. The process is not simple in every aspect, although the charter allows some flexibility for prospective member countries. Professional and public debate ensued in many countries of the region concerning whether the charter's prescriptions really ensured coherent development or if the moderate cosmetic changes necessary for compliance actually disguised traditional corruption and antidemocratic phenomena.

Such debates are interesting from another aspect as well. The whole process of reform exhibited numerous changes of direction in the 1990s. As will be demonstrated later in this study, attempts to group countries according to the systems they have adopted are quite problematic, since such analogies will probably become defunct as the trajectory of transition continues to shift country by country in the coming years. In all of these countries debates have been nearly continuous concerning the question of which route of modernization to follow and which model to adopt. Thus, identifying "typical" features and creating subgroups should be understood as temporary. A better way to a more thorough analysis is to typify national reforms and the route of attempts as a whole.

2.1 Political Environment and Legal Basis for Reform

Local reform is an important part of more general systemic transformation. Theoretically at least two basic models can be implemented to achieve an operational self-governing regime. The first is based on a national constituent process from the very start. In this model, a framework is created while simultaneously initiating procedures based on new principles and institutions. A constituent assembly passes basic laws on the division of power at each level of government. The period for this preparation typically is quite limited due to the vacuum of legitimate power; former institutions and officials are not expected to contribute to the introduction of a system that will threaten their own positions, so elections are realized as quickly as possible in order to establish new structures with full legitimacy. The parliament can then continue to develop, supplement and improve the elements and mechanisms of the system.

The second purely theoretical model is that after a political vacuum or publicly accepted interim period, elections are held in accordance with democratic regulations passed by the former parliament, and then the newly elected parliament establishes the division of power based on institutions and operations typical of democratic systems. In this scenario the early stages of local government development follow a consistent, legitimized process. The first step is the adoption of regulations on local elections and the basic framework of local governance. After the democratic establishment of local institutions parliament, municipalities and other authorities contribute to the development of other elements of the anticipated system.

The first model is more logical from a political point of view as it addresses the problem of legitimacy from the very beginning of the shift in power structures. In the second, the starting position depends very much on the political setting, personality of leaders, et cetera, and as a result, there is no guarantee that reform will be successful. However, after the first, generally precarious stage (that is, the establishment of rules for truly free elections by the former, nondemocratically elected parliament), chances for systematic development are better.

Naturally, in different countries these models were realized with unique national corrections. Specific elements and compromises altered constitutional frameworks and basic institution-building processes. One of the most important influences in this particular group of countries was obtaining independence. Secession from former federations very much affected the process of institutionalization of local governance. However, most of the necessary elements of change have been realized since the late 1980s.

A possible commonality concerning the above mentioned models and their different versions is that a "critical weight" of change is necessary before systemic transformation can be realized in the building of democratic state and local government. The first stage can be reached utilizing different schemes and gradations, but in the end a number of crucial elements must be present.

Common issues of basic legislation critical for democratic local governance are as follows. The first package consists of:

* constitutional changes (either a new constitution or crucial modification of the previous one);

* acts on local government coherently codifying the basic rules of the new system, including two major facets-structure and operational rules;

* acts on free local elections, defining the electoral system and process.

The second common package of legislation establishing the scope of local government includes:

* civil servant and public employee acts;

* acts on the scope and duties of public administration at each level;

* acts on property transformation.

Property transformation was one of the most important elements of change from communism and state socialism to the market economy and democracy. Such transformation necessitated crucial changes in the structure of formerly monopolistic property relationships. This process affected local governments in various respects, but most importantly, many of their assets were privatized, and they became true owners liable for their actions.
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Basic legislation is also necessary for specific systemic issues, such as:

* the status of the capital city,

* financial regulation of local governments.

The timing of financial regulation is crucial to the extent of transformation. Without new budget mechanisms, rules of taxation, guaranteed and independently acquired revenue, local autonomy cannot be realized. The real power of local authorities depends very much on financial autonomy and liability coupled with the opportunity for independent decision-making.

These different packages of legislation provide the minimal legal changes necessary to create an appropriate environment for local ...

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