Posts Tagged ‘recession’

Demanding more from the weakest

Monday, May 31st, 2010

Credit © European Union, 2010

Controversial decision from the Spanish government to ban any loans by municipalities from January 2011.

The socialist government of Rodriguez Zapatero passed last week a law with immediate effect that forbids local governments to contract debt to finance investment. The decision, which was adopted without prior notice or debate, came as a surprise for all mayors of large and small cities, and seriously compromised the 2010 budget execution. The reaction from local governments – including large cities governed by socialist mayors like Barcelona or Zaragoza – was unanimous and after a few days, president Zapatero has had to rectify. The ban will come into force from January 2011.

This measure is part of the blunt strategy of the Spanish government to reduce public deficit, a common strategy to most of the EU member States, with deep cuts in public expenditure. What is surprising is that such a drastic measure (the ban on any kind of loans) is applied to only one of the three levels of public administration in Spain, the local one, without affecting the Central State or Autonomous Communities (regional governments).

In a previous contribution on the impact of the crisis at local level, we mentioned that the aspirations for greater financial devolution would be muted as a side effect of the fight against public deficit. However, we did not expect that the hardest efforts were to fall on the shoulders of the weakest: local governments.

Miguel Rivas
URBACT Lead Expert

Financial devolution: postponed again due to economic crisis?

Tuesday, March 30th, 2010

As stated last year by Peter Mehlbye, Director of the ESPON Coordination Unit, “when addressing the global economic recession it is crucial to underline that the crisis is in progress and not over yet, despite first encouraging signs of recovery”. Unfortunately, in the first months of 2010 early impressions of recovery are being altered by gloomy news and prospects from Greece and in a lesser extent from Ireland, Portugal or Spain. In addition, some countries in Eastern Europe are also facing high uncertainty.

The way in which cities are facing short-term impacts by economic downturn has dramatically raised yet again the question of financial devolution. The lack of devolution explains the scarcity of local packages of anti-crisis measures, including formal recovery plans. And in the few cases where there are such initiatives, they are limited to soft support measures, based on little public funding. Nowadays, local governments have no say in neokeynesian strategies.

According to the Centre for Cities, the British think-tank on urban issues, “the recession is a time for more devolution, not less; the downturn is affecting places differently, and cities need to be better able to respond with tailored solutions” [www.citiesmanifesto.org]. Sadly this demand has not yet been realised; and it is far from what is actually happening these days.

Thus, the strong increase of social expenditure and Keynesian measures and the huge flow of resources to rescue of the financial system have made the public deficit in the EU skyrocket. In the Euro zone, it is forecast to reach 7% of GDP by 2010. In Ireland, the public budget balance is estimated to turn from a surplus of 0.5% of GDP in 2007 to a deficit of 15% in 2010. In the same period, Spain will move from a surplus in national budget of roughly 3% of GDP to a deficit of 11%. Such strong deterioration of public accounts will not create the propitious ground needed for the issue of devolution to be included in national and regional public agendas.

And this is worrying. City governments have suffered from a lack of relevant tools to respond locally to the impacts of crisis. These kinds of local responses, when properly combined with those from broader scales, could act as a contribution in the fight against economic downturns. Over all, now the main challenge to be addressed by political personnel is to make sure that things will not remain unchanged after this juncture.

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Miguel Rivas. URBACT Lead Expert for Creative Clusters

YES WE CAN (address the climate changes) !

Wednesday, July 22nd, 2009

It could be the leitmotiv of the new Swedish Presidency of the EU.

The European Parliament fixed very ambitious objectives in the “Climate change package” adopted last year (see this URBACT newsletter article to know more). To reach these objectives is now one of Sweden’s main priorities.

No more rhetoric, but bold agreements and decisions are expected. Especially during the UN climate conference in Copenhagen next December. The multilateral negotiations held during the coming months will be crucial to reach an “effective agreement” : Sweden wants Europe to be a lead actor of these negotiations.

Today, Europe battles its most severe economic recession in decades. In this context, what are the strengths of the EU and of its Swedish presidency to carry out this challenge successfully ?
Anne-Laure Guignard