The Congress of Local and Regional Authorities of the Council of Europe is responding to the current economic downturn by organising a debate on territorial consequences of the international financial crisis in the framework of its Spring Plenary Session.
Fact Sheet – background paper
- Date: Wednesday, 4 March 2009 as from 10h15 (Hemicycle of the Council of Europe, Strasbourg)
- Background: “Financial crisis shakes Moscow City”….”Munich Mayor Ude warns about severe financial crisis of local and regional bodies”…”Financial crisis ensures London 2012 facing chilly review” – newspaper headlines make us aware of the territorial consequences brought on by the global economic downturn. The big crash of 2008 – which started with the bursting of the housing bubble in the United states and is frequently claimed to be the worst crisis since the Great Depression – has begun to affect European cities and regions, although national governments keep adopting multi-billion rescue plans and the financial base of the sub-national public sector is, in principle, a solid one.
- Participants in the Congress debate:
Marucie VINCENT, Mayor of Saint-Etienne, President of “Saint-Etienne Métropole” (France)
Vladmir MOSKOV, Mayor of Goce Delcev (Bulgaria)
Vice-President of NALAS (Network of National Associations of Local Authorities of South East Europe)
Michèle SABBAN, President of AER (Assembly of European Regions), Vice-President of the “Région Ile-de-France” (France)
Svetlana ORLOVA, Vice-Chair of the Council of the Federation (Russian Federation), Head of the Russian delegation to the Congress
Yevgen KARTASHOV (Ukraine), member of the Ukrainian delegation to the Congress
- Elements for the debate:
- Local and regional authorities in Europe play a major role in respect of public investments (2/3 of public investments within the European Union are made by territorial bodies; since 2000 territorial investments have increased by 3,2%) – at the same time, debt has increased (3,9% since 2000) but represents only 5,7 % of GDP (in comparison to 65% total public debt in EU member states);
- in 2007, when the economic environment was still favourable, the sub-national public sector (municipalities, departments, provinces, regions etc) was able to consolidate its good financial health, recording a budget surplus for the first time since 2002 – thus inverting the trend observed over the period between 2002 to 2007 during which debt increased by an average of + 2,2% in volume per year;
- the collapse of financial products and transactions (e.g. since the 1990s, Cross-Border-Leasing has been widely used by territorial bodies to exploit the difference in the tax laws between Europe and the United States) triggered a chain reaction – from the loss of value to the loss of confidence between banks and finally, the breakdown of consumer confidence; local and regional authorities are part of this financial circuit and hence seriously affected by this systematic crisis – a lack of economic activity (e.g. granting of private and public-sector loans) and investments result in a decrease in tax revenues;
- there is no obvious solution to this crisis, but there are different ways in which central and local governments could intensify their dialogue and cooperation, e.g.:
o by joint programming of counter-cyclical spending to increase public investments as a way to boost economic activity,
o by timely identification of emerging problems in specific territories or industries (to avoid dismissals of staff if possible);
o by helping local governments to reduce their debt burden (in cases where old municipal debt is still dragging);
o by encouraging local authorities to make prudent budget provisions for 2010 and 2011;
o by preparing a catalogue of investments projects that could be implemented rapidly (e.g. energy saving programmes);
o by monitoring employers, public and private enterprises that may be at risk of lay-offs or plant closures and engage in proactive measures;
o by communicating pro-actively with the citizens.
- Related Documents : Meetings - 16th Plenary Session of the Congress / 03 March 2009