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Über dieses Buch

This edited collection provides a comprehensive geographic and chronological overview of the decentralisation processes in the successor states of former Yugoslavia and Albania during their transition and EU integration years, from 1990 until 2016. These countries present a unique laboratory for the analysis of economic, social and political change, having traversed armed conflicts, dramatic economic and political changes, and EU pre-accession processes involving deep institutional reform. They have also endured the Eurozone crisis, which has led to high levels of unemployment, wide fiscal gaps and dangerously high levels of indebtedness.

Observing the quarter century-long transition from socialism to capitalism through the prism of decentralisation sheds new light on studying the political economy of the region and the current status of the individual countries in terms of economic development and their EU integration progress. The contributors enrich the wider literature on fiscal decentralisation in transition countries by exploring several broad questions on democratisation, the political economy of post-communist transition, the role of external actors in policy transfer and the issue of financial stability in the post-crisis period.



1. The Political Economy of Decentralisation and Local Government Finance in the Western Balkans: An Overview

This introductory chapter provides a general overview of the political economy of decentralisation in the Yugoslav successor states and Albania, and sets out the structure of the book. It provides a methodological umbrella for the analytical approaches applied in the country case studies, emphasising the political economy drivers of decentralisation reforms that have taken place over the whole transition period from 1990 to 2016. It argues that decentralisation has attained only partial success in addressing the specific policy objectives of democratisation, balanced economic development, and post-conflict reconciliation of ethnic communities. It also guides the reader through the main arguments discussed in each chapter of this volume, situating the eight case study countries into the wider discussion of the political economy of decentralisation in the post-communist transition process.
William Bartlett, Sanja Kmezić, Katarina Đulić

Europeanisation and the Political Economy of Decentralisation


2. Slovenia: Vertical Imbalance in Local Government Financing

The purpose of this chapter is to present the territorial and administrative structures of local self-governance in Slovenia and to describe the process of fiscal decentralisation along with the important milestones in its development. The chapter places special emphasis on the process of exaggerated territorial and administrative decentralisation in relation to individual issues of fiscal decentralisation. Having created an extensive number of small municipalities that for the most part reflect political compromises, Slovenia has established a local self-government system that, mainly due to the diversity of the municipalities and the fact that all municipalities, regardless of their size, have identical jurisdiction, makes it impossible to create a transparent and economically equitable model of municipal financing.
Boštjan Brezovnik, Mateja Finžgar, Žan Jan Oplotnik

3. Croatia: Instruments of Fiscal Equalisation

The aim of this chapter is to present the administrative-territorial structure of Croatia and describe the process of fiscal decentralisation. Particular attention is given to the functions devolved over time and revenue sources for financing of decentralised functions and an overview of local government units (LGUs) borrowing, debt and contingent liabilities. The emphasis of the chapter is on LGUs’ capital investments and financing from European Union (EU) funds, as Croatian experience in the EU might be of interest also for other countries within the region. The phases of fiscal decentralisation in Croatia follow the evolution of the fiscal equalisation and general LGUs’ financing system, constantly exposed to political influence.
Anto Bajo, Marko Primorac

Crisis, Policy Reversals, and Local Government Debt


4. Serbia: Local Government Financing and Non-transparency of Fiscal Data

This chapter studies the processes of territorial, political, and fiscal decentralisation in Serbia from 1990 until 2016. It focuses on the changes in policies and regulations on municipal expenditures and revenues. Three distinct phases are observed: (1) 1990–2000, with a highly centralised authoritarian governance; (2) 2000–2008, with a rapid decentralisation of government functions and revenues; (3) 2009–2016, with a policy reversal leading to re-centralisation. The outcome has been a reduction in the share of municipal revenues and expenditures in GDP from ~7.0 per cent at the peak of fiscal decentralisation in 2007 to ~5.9–6.0 per cent in 2015. One of the key features of the Serbian public finance system has been fiscal data non-transparency, which hampers policymaking and expert analysis.
Sanja Kmezić, Katarina Đulić

5. Montenegro: Volatile Municipal Revenues

More than a decade after the process of fiscal decentralisation began aimed at increasing the efficiency of public finances at the local level, municipalities in Montenegro are in a challenging financial situation, facing high debts and arrears. This chapter presents the administrative-territorial structure of Montenegro and describes the evolution of the political and fiscal decentralisation processes in the country since the beginning of the 1990s. The chapter includes an analysis of the key legislative changes that have occurred, as well as an empirical analysis of the fiscal impact of these changes on municipal budgets.
Jadranka Kaluđerović, Mijat Jocović

6. Bosnia and Herzegovina: Local Government Debt

Fiscal decentralisation in Bosnia and Herzegovina is characterised by a complex post-conflict constitutional organisation consisting of two entities and one self-governing unit. The decentralisation process and the position of local government units in both entities over the past 20 years can be divided into three phases. Although the entities are constitutionally organised differently, the assignment of expenditures to local government units is similar in each one and did not change over time. At the same time, the allocation of revenues to local government units has improved significantly. However, since indirect tax revenues take the highest share of their total revenues in both entities, with the outbreak of global financial crisis these revenues became volatile, which triggered a rise in local public debts in both entities.
Halko Basarić, Nina Branković, Lejla Lazović-Pita

Local Governments in Transition and the Political Economy of Ethnicity


7. Macedonia: Local Government Efficiency and Ethnic Fragmentation

Since its independence in 1991, Macedonia has experienced three distinct periods of decentralisation. This chapter presents the process of territorial organisation in Macedonia during these three periods, as well as the trends and developments of the revenues, expenditures, and the horizontal equalisation design. The third period, beginning in 2005, gained momentum following the post-Ohrid Framework Agreement (OFA) new Constitution and was marked by an ethno-political impact on the efficiency of public service delivery at the local government level. The analysis shows that the expensive preferential policies adopted during decentralisation in post-OFA Macedonia might not be matched with the level of development of the social capital in the country.
Marjan Nikolov

8. Kosovo: Can Decentralisation Resolve Ethnic Conflict?

This chapter examines the process of decentralisation and the system of local government financing in Kosovo, covering two distinct phases of local government reforms, from 2000 until 2008, and from 2008 until 2015. Since the creation of new municipalities in 2001, local government reforms have been highly contentious and inextricably linked with both the final status of Kosovo and the state-building process. Despite the adoption of an advanced legal framework, the introduction of direct mayoral elections, and the semi-integration of the Kosovo Serb minority, the process of decentralisation has been challenged by the failure of the central government to allocate sufficient funding for the new municipal competencies and the poor trends of own-source revenue collection by Kosovo municipalities.
Adem Beha, Anton Vukpalaj

Albania: Struggling with the Legacy of Extreme Centralisation


9. Albania: Aligning Territorial and Fiscal Decentralisation

This chapter provides an overview of decentralisation reforms in Albania over the last 25 years. Although offering a similar bundle of instruments, decentralisation reforms undertaken across four distinct periods differ substantially in terms of scope, incentives, and outcomes. Albania has established the building blocks for effective local governance. Yet, significant challenges remain, in particular in the fiscal dimension of decentralisation. Local tax powers, and thereby local finances, continue to be sacrificed to serve “higher causes” by subsequent national governments which seek to retain control over specific financial instruments to influence capital investments at the local level. Recent reforms offer great opportunities, which might be lost if they are not effectively implemented and complemented by additional measures that remove constraints on local revenue-raising options.
Elton Stafa, Merita Xhumari



10. Conclusions: Policy Changes and Policy Reversals

The concluding chapter analyses the reasons for differences and similarities behind various decentralisation approaches in the eight countries covered in the book. Key drivers of the decentralisation agenda were the international donor community and development agencies, along with the EU. The chapter compares the four groups of countries by analysing (1) the key contextual determinants and motivation for decentralisation; (2) the political economy behind political, territorial, and fiscal decentralisation, as well as the special issues that flavoured the process; and (3) the current trajectory of fiscal decentralisation and its outcomes. The authors conclude that the political commitment to decentralisation faded during the period of global economic crisis leading to major policy reversals in almost all countries in the region.
Katarina Đulić, Sanja Kmezić, William Bartlett


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