Local finances 14

Advisor – Territorial Cohesion & Local Finances

GAUDRON Marine In Energy, Local finances, Local finances, Press, Publications

Sustainable local finances in Europe

CEMR releases landmark study on local finances in European countries

Discover the online tool

People depend on quality local public services and infrastructure every day. Reliable buses, insulated public housing, good schools or clean energy: all of these and more depend on healthy and sustainable local public finances to be developed and maintained.

That’s why the Council of European Municipalities and Regions (CEMR) is releasing a fully-fledged online report and tool entitled Local Finances and the Green Transition in Europe. This one-of-a-kind study provides data and analysis on the trends in local and regional finances in 40 European countries over the past 10 years. The study offers a bird’s eye view of both changes in subnational finances and the remarkable diversity of national situations.

“This report is essential reading for policymakers, politicians and academics. Only by understanding local public finances and unlocking futher investments can we achieve the sustainable and resilient societies our people and planet need”, said CEMR Secretary General, Fabrizio Rossi, who added: “If this report shows one thing, it is that well-funded municipalities, counties and regions are essential to taking care of our people and realising the environmental transition“.

Revealing figures and trends as observed over the last decade

The study reveals for instance that despite making up 25% of all public spending, local and regional governments finance 54% of all public investment. This reflects the leading role of municipalities and regions in investing in areas such as energy efficient housing, smarter public transport and local environmental protection. The climate and energy transition will only happen by working with local and regional governments.

Also noteworthy is that subnational government debt is at a manageable level in the 36 countries where comparative data was available. In fact, local debt is low and stable, a mere 4.8% of GDP on average. By way of comparison, general government debt increased by the middle of the decade to 67% of GDP (and to 81% in 2020).

While browsing through the online study, you will also come across a special section on the impact of the EU’s €720-billion post-COVID recovery plan on local and regional governments. This chapter looks in particular at the implications for the green transition and territorial cohesion.

The data shows clearly that the share of green transition among the main RRF spending areas is higher in the decentralised countries. Stronger local and regional governments can support more recovery and resilience programmes and actions.

A dynamic and interactive online tool

“Local Finances and the Green Transition in Europe” is available as an interactive online tool as well as in PDF format. The online tool contains:

an easy to navigate structure, allowing you to zoom in on any part of the report that interests you, from macroeconomic analysis to the take-away political recommendations
an interactive map with selectable local financial data
the ability to view any of the study’s 36 charts, 12 statistical tables and 25 national case studies
an introductory video

The study is currently only available in English. The French version is under development.

The study was launched on 10 November 2022 at the occasion of a seminar bringing together representatives of many of CEMR’s member associations, the OECD, KDZ and the study’s co-author Gábor Péteri.

For more information:

Advisor – Territorial Cohesion & Local Finances

GAUDRON Marine In EU budget, EU budget, Impact community Cohesion, Impact community Cohesion, Local finances, Local finances, Press, Publications, Territorial development, Territorial development

Boosting public investment for recovery

CEMR calls for investment-friendly EU economic governance reform

Read the position paper here

The COVID-19 crisis exposed vulnerabilities in Europe’s economic governance and the need to rethink how EU rules support long-term, sustainable investment at all levels of government. In its 2022 position, the Council of European Municipalities and Regions (CEMR) argues that the reform of the EU’s economic governance framework is a vital opportunity to unlock local and regional investment capacity.

Local and regional governments, which account for 45% of public investment in the EU, were heavily impacted by the crisis. While they expanded essential services and supported communities, they also faced falling revenues and limited fiscal space. CEMR warns that without urgent reform, municipalities risk being held back from investing in vital green, digital, and social transitions.

CEMR proposes several key changes:

Strengthen multi-level governance: Local and regional voices must be involved in economic coordination, including through a reformed European Semester with mandatory application of the partnership principle.
Recognise investment as a priority: The new framework must distinguish between current spending and long-term, sustainable investment to avoid penalising municipalities for future-oriented projects.
Grant borrowing flexibility: Local and regional borrowing for structural investments should not be constrained by national debt calculations under the Stability and Growth Pact.
Establish a European municipal and regional bank: This new facility within the EIB would support local investment, particularly through pooled resources and tailored green or social bonds.
Support local capacity building: Municipalities need the tools and skills to plan and deliver strategic investments, especially in health, care, and infrastructure.

CEMR also highlights the importance of maintaining local leadership in the implementation of National Recovery and Resilience Plans. Without adequate autonomy, funding, and engagement, the EU’s sustainable recovery goals, particularly those of the Green Deal, risk being delayed or derailed.

Ultimately, CEMR calls for a governance framework that enables, not restricts, local ambition, empowering municipalities and regions to invest in the future of Europe’s communities.

For more information, contact:

Advisor – Territorial Cohesion & Local Finances

BENNIS Hamza In Employment, Employment, EU budget, EU budget, Impact community Cohesion, Impact community Cohesion, Impact community Labour, Impact community Labour, Local finances, Local finances, Press, Publications, Territorial development

Modernising working time rules

Balancing worker protection with flexibility and legal clarity in local public service delivery under the Working Time Directive

The Council of European Municipalities and Regions (CEMR) has responded to the European Commission’s public consultation on the review of the Working Time Directive (WTD), urging the EU to prioritise legal certainty and respect for local autonomy in any future reform.

Unchanged since 2003, the current Directive no longer fully reflects today’s labour realities, especially for local and regional governments as major public employers. While modernisation is welcome, CEMR warns against overreach: the Directive should focus strictly on health and safety, without encroaching on broader employment issues that fall outside the EU’s remit, such as wages, work-life balance, or new working patterns.

In its response, CEMR reaffirms key positions first set out in its 2011 position paper, which remain relevant today. It calls for:

Flexibility for social dialogue: Local social partners are best placed to find tailored solutions through bargaining and agreements that balance worker protection with service continuity.
Clear limits to scope: The Directive must not expand into areas that are either outside EU competence or not directly related to health and safety.
Legal certainty: Any revision should result in simpler, clearer rules that avoid legal ambiguity and reduce the administrative burden on local authorities.

CEMR further stresses that the review must take full account of the impact on local and regional governments’ ability to provide uninterrupted public services, especially in sectors like emergency care and civil protection, where flexible working patterns are essential.

CEMR concludes that no legislative initiative should proceed before the publication of detailed impact assessments and a full analysis of the public consultation. In the meantime, it stands ready to engage in open and constructive dialogue with EU institutions to ensure a balanced approach that works for all levels of governance.

For more information, contact:

BENNIS Hamza

Officer – Employment, Digitalisation and Public Services

THOMAS Carol In EU budget, EU budget, Governance, Governance, Impact community Cohesion, Impact community Cohesion, Local finances, Local finances, Press, Publications, Territorial development

Boosting public investment capacities

Rethinking EU economic governance to empower local investment and drive sustainable recovery

The COVID-19 crisis has reshaped Europe’s economic landscape and highlighted the essential role played by local and regional governments. From enforcing public health measures to supporting vulnerable communities, municipalities and regions have borne the brunt of the pandemic’s immediate and long-term impacts, often while facing steep declines in revenues.

As the EU reflects on the future of its economic governance, the Council of European Municipalities and Regions (CEMR) urges a rethink of the Stability and Growth Pact to better align it with today’s realities and tomorrow’s challenges.

Local governments account for nearly half of public investment in the EU, yet current fiscal rules often restrict their capacity to finance long-term projects. CEMR’s position paper identifies several ways the framework could evolve to support recovery, green and digital transitions, and social inclusion. These include:

Stronger multi-level governance and genuine consultation with local authorities in EU economic coordination;
Greater fiscal flexibility to support sustainable and long-term local investments;
Addressing the investment backlog through accessible financing and capacity building;
Establishing a dedicated European municipal and regional investment facility within the EIB to boost green and digital development;
Ensuring that local-level contributions to the EU Green Deal are not blocked by rigid budget rules.

Reforming EU economic governance is an opportunity to recognise and unleash the potential of Europe’s cities and regions. A more balanced, investment-friendly approach will strengthen resilience, equity and sustainable growth across the Union.

For more information, contact:

THOMAS Carol

Senior Adviser, Governance, Gender Equality, Local Democracy

GAUDRON Marine In EU budget, EU budget, Local finances, Local finances, Press, Publications

Local finances hit by COVID-19

CEMR report reveals rising costs and falling revenues for local and regional governments during the pandemic, threatening public services and investments

Read full study

As the COVID-19 pandemic swept through Europe, local and regional governments (LRGs) were on the frontlines, maintaining public services, managing emergency measures, and supporting vulnerable communities. A new analysis by the Council of European Municipalities and Regions (CEMR) sheds light on how this essential work came at a high financial cost, creating long-lasting challenges for municipalities and regions across Europe.

Based on a survey conducted among 40 national associations in 15 countries, the CEMR report highlights what it calls a “scissor effect”: rising local expenditure paired with declining revenue. While towns and regions had to invest in health, social care, education, and digital tools to respond to the crisis, income from taxes, public service fees, and tourism sharply declined.

Some countries, such as Sweden and Estonia, offered significant support to help offset these financial shocks. Others, including Portugal, provided little to no compensation. The situation varied widely, revealing major disparities in how LRGs were supported at the national level.

The report also underscores the challenges LRGs faced in accessing EU support due to limited consultation, legal constraints, or complex procedures. Despite some flexibility under EU fiscal rules, many authorities remain uncertain about their mid- and long-term financial stability. The risk: cuts to investment in essential areas like climate action, digitalisation, housing, and public transport.

CEMR calls for a long-term rethink of how LRGs are financed and included in national and EU recovery plans. Municipalities and regions have proven their capacity to lead in times of crisis. To continue doing so, they need clear legal frameworks, financial autonomy, and a real partnership with national and European institutions.

The report is a clear reminder: Europe’s recovery depends on strong, resilient local and regional governments. Equipping them today is the key to building a more sustainable, inclusive, and future-proof tomorrow.

Read the study here

For more information, contact:

Advisor – Territorial Cohesion & Local Finances

BENNIS Hamza In EU budget, EU budget, Impact community Cohesion, Impact community Cohesion, Local finances, Local finances, Press, Publications, Territorial development

Localising the European semester

CEMR-EPSU project shows local governments and social partners remain under-involved in shaping EU economic governance

Read full study

The European Semester, introduced in 2010 to coordinate national economic, employment, and social policies across the EU, has become the backbone of EU economic governance. Its annual cycle guides Member States’ reforms and budgets under the Stability and Growth Pact and the Europe 2020 strategy. Yet, despite its importance, the role of local and regional governments (LRGs) and social partners in this process remains limited.

A joint project by the Council of European Municipalities and Regions (CEMR) and the European Public Service Union (EPSU), carried out between 2018 and 2020, examined how and why subnational actors are involved in the Semester. It assessed the rationale for their participation (“why”), the mechanisms used in different Member States (“how”), and the quality of this involvement (“how well”).

Findings suggest that while LRGs are increasingly acknowledged, their input often depends on existing national dialogue structures and the political will of central governments. Social partner organisations, particularly trade unions representing the local government sector, are even less involved, with national peak organisations rarely consulting their membership in depth before feeding into the process.

The project also highlighted good practices: more systematic consultations, stable structures for dialogue, and efforts to ensure that recommendations (Country-Specific Recommendations, or CSRs) reflect local realities. However, in many cases, LRGs and social partners have little influence over the drafting and implementation of National Reform Programmes (NRPs), undermining ownership of the Semester.

From a broader perspective, the research confirmed that EU recommendations are more likely to be followed when countries face strong market pressures, when reforms are tied to EU financial rules, or when smaller states seek EU legitimacy for their policies. But there is still a gap in understanding whether stronger involvement of LRGs and social partners leads to better implementation of reforms, a gap that future research should address.

The report concludes that the Semester can only be effective if it becomes more inclusive. To strengthen ownership and impact, national governments and EU institutions must ensure that local and regional governments, as well as social partners, are systematically and meaningfully involved in shaping and implementing economic and social reforms.

Read the study here

For more information, contact:

BENNIS Hamza

Officer – Employment, Digitalisation and Public Services

THOMAS Carol In EU budget, EU budget, Governance, Governance, Local democracy, Local democracy, Local finances, Local finances, Press, Publications

Lessons from the COVID19 Pandemic

Local and regional governments need stronger support, recognition, and autonomy in times of crisis

As Europe continues to grapple with the long-term consequences of the COVID-19 crisis, the Council of European Municipalities and Regions (CEMR) highlights the vital role of local and regional governments during the pandemic and the urgent need for stronger multilevel governance and financial resilience.

From the earliest days of the pandemic, local and regional authorities were at the frontline: managing public health measures, ensuring social services, maintaining education and local transport, and supporting vulnerable groups. They also had to cope with increased expenditure while facing plummeting revenues, a phenomenon CEMR described as the “scissor effect.” Despite their efforts, many municipalities and regions received little compensation or recognition for their critical role.

In light of these challenges, CEMR has outlined ten key recommendations to ensure more effective responses in future crises and support long-term resilience:

Recognition of essential services
Local and regional governments must be acknowledged as essential actors in crisis management. Their competences, funding, and resources must be guaranteed and reinforced, with better alignment of policies across government levels.
Equal access to EU recovery tools
Municipalities and regions should be directly involved in shaping and implementing national recovery plans, particularly in the context of the Recovery and Resilience Facility. This means ensuring equal access to EU funds, simplification of procedures, and stronger monitoring mechanisms.
Flexible financial frameworks
The EU fiscal rules need to evolve. CEMR calls for more flexibility for local and regional governments in borrowing and investment, especially for long-term sustainable projects. Debt incurred for these purposes should be excluded from deficit calculations under the Stability and Growth Pact.
Stronger digital transition
The pandemic highlighted the digital divide across Europe. More investment is needed to strengthen local digital infrastructure and capacity, especially in rural and underserved areas. Local and regional authorities must play a central role in the EU’s digital transition.
Health, care, and social services
Municipalities and regions are often responsible for delivering or coordinating health and care services. They must be involved in national health policy planning, with proper resources and long-term investment to ensure quality and accessibility.
Support for local economies
Cities and regions played a key role in supporting local businesses and workers during the crisis. The EU and Member States must ensure that economic recovery policies reach the local level and that municipalities can take proactive measures to protect local economies.
Strengthening social cohesion
COVID-19 amplified existing inequalities. Local authorities are best placed to address social exclusion, support vulnerable groups, and reinforce community resilience, but need adequate funding and policy support.
Better governance
The pandemic exposed the weaknesses of top-down crisis responses. Multilevel governance, subsidiarity, and the partnership principle must be strengthened to ensure effective cooperation and faster, more tailored solutions.
Green recovery
Recovery funds and policies must prioritise sustainability. Local governments are already implementing the Green Deal at ground level, through sustainable mobility, energy-efficient buildings, and green public spaces. Their role must be formally supported in EU policy and funding instruments.
Crisis preparedness
Europe must develop better tools for future emergencies. This includes building the capacity of local administrations, sharing best practices, and ensuring municipalities have access to critical resources when crises hit.

Conclusion
The COVID-19 pandemic has been a stress test for European governance and local governments passed it with resilience and determination. Now, CEMR urges EU institutions and Member States to turn these lessons into action. By strengthening the role, autonomy, and resources of local and regional authorities, Europe can better prepare for the next crisis and deliver a fair, green, and inclusive recovery for all.

For more information, contact:

THOMAS Carol

Senior Adviser, Governance, Gender Equality, Local Democracy

GAUDRON Marine In EU budget, EU budget, Governance, Governance, Impact community Cohesion, Impact community Cohesion, Local finances, Local finances, Press, Publications, Territorial development

COVID impact on local finances

A Europe-wide snapshot of the pandemic’s fiscal impact on municipalities and regions, and what support is still missing

Read full study

The COVID-19 pandemic placed local and regional governments at the frontline of public health response in Europe. While ensuring safety, maintaining essential services, and supporting vulnerable populations, these governments were simultaneously burdened with spiralling costs and plummeting revenues. A survey conducted by the Council of European Municipalities and Regions (CEMR) in May 2020 offers critical insight into the financial distress faced by cities and municipalities across 17 European countries.

The survey reveals a dual pressure on local and regional finances: soaring expenditures, primarily for personal protective equipment, sanitation, and social support and sharp declines in revenue due to reduced economic activity. Tax revenues, municipal service fees, and income from the cultural and tourism sectors were severely impacted. For example, Bulgaria saw a 41% decrease in municipal income from its own sources, and Austria faced estimated municipal revenue losses between €900 million and €2 billion.

While local authorities acted swiftly, organising food deliveries, providing accommodation for healthcare workers, and ensuring online education, support from national governments was slow and often insufficient. Although a few countries, like Estonia and Germany, implemented meaningful aid measures, most national support was delayed, limited, or only promised in future budget cycles.

Many governments, like in France and Sweden, pledged support, but uncertainty remains about the long-term sustainability of subnational budgets. Furthermore, the varied structure of local financing systems across Europe means that the financial impact differs widely between countries and even among municipalities within the same country.

The CEMR report makes it clear: without timely and adequate support from national and European levels, local and regional governments risk losing the capacity to invest in recovery and sustainable development. To prevent a prolonged post-pandemic investment slump, EU funds, especially from the Recovery and Resilience Facility, must be made directly accessible to local authorities.

Only by empowering municipalities can Europe hope to achieve its long-term goals for resilience, cohesion, and sustainability. Now is the time for stronger multilevel cooperation and for the EU to acknowledge the central role of local and regional governments in shaping recovery.

Read the study here

For more information, contact:

Advisor – Territorial Cohesion & Local Finances

GAUDRON Marine In EU budget, EU budget, Impact community Cohesion, Impact community Cohesion, Local finances, Local finances, Press, Publications, Territorial development, Territorial development

Strong Budget, Strong Cohesion

CEMR urges EU leaders to secure an ambitious long-term budget that empowers local and regional governments

As EU leaders prepare to decide on the next Multiannual Financial Framework (MFF), the Council of European Municipalities and Regions (CEMR) calls for a robust budget and a cohesion policy that keeps local and regional governments at its core.

The need for an ambitious MFF

CEMR stresses that ambitious European goals, sustainable development, the Green Deal, and social inclusion, cannot be delivered without a strong budget. Any further cuts to cohesion policy, such as those recently proposed, would undermine Europe’s ability to meet its commitments. Local and regional governments, as the key actors implementing EU policies on the ground, rely on a timely agreement to ensure a smooth transition to the next funding period.

Just Transition and partnership

CEMR welcomes the creation of a Just Transition Fund to support regions in the shift towards a low-carbon economy. However, these new measures must come with additional funding, not at the expense of cohesion policy. Equally vital is the Partnership Principle, which guarantees that municipalities and regions are directly involved in programming and implementing EU funds. This principle must remain a cornerstone of cohesion policy.

Europe’s ambitions will only succeed if local and regional governments have the tools to deliver them. A strong MFF, safeguarded cohesion funding, and reinforced partnership are the foundations of a Europe closer to its citizens.

For more information, contact: