General Assembly of the Council of European Municipalities and Regions (CEMR)

“Crisis exit strategies”

Cadiz, Spain, 27 September 2012

Speech by Keith Whitmore, President of the Congress of Local and Regional Authorities of the Council of Europe

[Check against delivery]

Mr Chairman,

Ladies and Gentlemen,

Dear colleagues,

First of all, it is a great pleasure for me to participate in this General Assembly of the Council of European Municipalities and Regions.

The Council of Europe Congress of Local and Regional Authorities entertains a special relationship with CEMR which, apart from having an observer status with the Congress, represents an important bridge to national associations of local and regional authorities as their European platform. Two weeks ago, we were pleased to welcome CEMR Secretary General, Mr Frederic VALLIER, to the fourth General Meeting of national associations of local and regional authorities that the Congress organised in Strasbourg, and I would like to thank Mr VALLIER for his active participation in discussions.

One of the items on the agenda of the General Meeting in Strasbourg was also the question of the economic crisis, its impact on local and regional authorities and the way forward. I am very much pleased that the CEMR General Assembly has also decided to focus on this probably the most crucial issue today, although it is hardly surprising.

As we speak about the way forward for European democracy, we cannot ignore the fact that the economic and financial crisis represents a major challenge to our democratic system today. The crisis has revealed some crucial shortcomings of this system, and is threatening to undermine the achievements of the past decades in Europe. I am speaking not only about the project of European integration, the question of solidarity and the glaring inadequacies in the system of burden-sharing brought to the fore by national budget deficits and the crisis of the common currency.

Nor am I speaking only about structural deficiencies of some European economies whose lack of competitiveness and flexibility contributed to their inability to adjust and cope with the crisis.

The crisis unveiled first and foremost a lack of capacity of our democratic institutions, which are part and parcel of European democratic governance, to deliver on the main promise of democracy – a promise of social justice, equal participation and fair distribution of resources.

Today, social cohesion in our societies is under threat as all levels of governance are struggling to maintain guarantees of key social rights such as employment, education, housing and quality health care. The crisis brought about a growing need for social assistance to households in economic distress and to the vulnerable population groups – children, young people, people with disabilities and the elderly. This puts a very serious strain first and foremost on local and regional resources that are already very much stretched because of shrinking revenues, cuts in intergovernmental transfers, decreasing local tax authority and the mandatory participation in fiscal consolidation programmes.

The crisis has also revealed inadequacies in the design of the public participation and decision-making processes. More and more people feel excluded from democratic decision-making as they do not have confidence in their parliaments’ and governments’ capacity to face the impact of the crisis, to “tame the markets” and to bring the economy under democratic control, also at the local and regional level. The grassroots level is also affected by the knee-jerk reaction of some governments to recentralize and to take away from local and regional authorities some of the competences and funding sources that were devolved to them under the European Charter of Local Self-Government.

In the same vein are the efforts by national governments to slow down regionalisation, to force amalgamations of municipalities in order to impose the economies of scale, and to eliminate whole intermediate tiers of governance as part of territorial reforms.

Thus, it is clear that the crisis represents a major challenge to our democratic system and particularly to our local and regional democracy, based on checks and balances between central governments and local and regional authorities. We have to transform this potential threat into an opportunity for change, pushing us to restructure the economy, improve efficiency, revise relations between different government levels, and increase direct citizen participation in governance. In other words, the crisis compels us to do better.

It is said that the best way out is the way through. We must live through the crisis drawing lessons from the problems it reveals and tackling them with adequate solutions. From this viewpoint, the three Ds proposed by this General Assembly – Decentralisation, Democracy and Development – are the perfect foundation for any exit strategies. We in the Congress are convinced that the way out – or the way through, if you wish – passes through these three requirements.

First, decentralisation. We are convinced that the way out of the crisis is through further decentralisation and greater budgetary autonomy. The crisis has revealed the fact that many local communities and regions in fact did not have enough means and responsibilities to respond to it adequately. A study commissioned by the Assembly of European Regions three years ago showed that, at regional level, decentralisation is a key to better economic performance and growth. Local and regional authorities know best the needs and circumstances of their communities, and they are in a position to act more effectively and more efficiently and to ensure an optimal use of local resources – not least also for reason of better transparency and accountability to citizens.

This was also recognised by the Ministers responsible for local and regional government of the 47 Council of Europe member states, who, already in 2009, at their conference in Utrecht, stressed in the final Declaration that – and I quote – “because of their knowledge of communities, people and businesses at local and regional level, local and regional government can be extremely powerful actors in addressing the needs of citizens and facilitating business in overcoming the economic crisis” – end of quote.

The Ministers reiterated this importance at their conference in Kyiv in November last year, when they stressed the need for both national and local and regional authorities to join their efforts in responding to the crisis. This was reflected in both the adopted Kyiv Guidelines for policy responses to the crisis and an Agenda in common approved by the Ministers, which identifies joint action in response to the crisis as one of the top priorities.

Decentralisation fosters economic performance and welfare through greater consideration of citizens’ wishes and needs. It also has an impact on the innovative capacity of regions and local communities, and higher decentralisation means better development of employment and a lower increase in unemployment. The current analysis of the four years of the crisis also shows that, while decentralised economies are no more immune to its impact than the centralised ones, they recover better as they adapt quicker to changing circumstances and show greater resilience overall.

Slowing down the decentralisation process is therefore a wrong answer to the current crisis. Regions and local communities need more power and responsibility; accordingly, national governments must reverse the recentralisation trend and provide further decentralisation in budgetary decision-making, giving local and regional authorities more liberty to decide how to allocate their budgets and further possibilities to raise their own funds (for example, through local taxation).

Second, development. The debate over austerity vs. growth stimulus must be decided in favour of growth. Reviving investment in regional and local infrastructure must be a priority in order to promote local competitiveness, encourage private sector investment and stimulate employment. The current fiscal consolidation constraints on local and regional governments may create cascade effects on local labour markets, mainly through public procurement, and threaten local growth possibilities. Consolidation constraints can also provoke or increase inequalities in local public service access and quality.

Measures taken at local and regional level to stimulate growth are also crucial for the overall economic revival, because local and regional governments underpin to a great extent the economic and social situation at national and European levels today. Local and regional financing must therefore be seen as an investment in local economic recovery, and it must be revised to provide a balance between allocations into social support programmes and investments into projects to stimulate local innovation and kick-start the local economy. Innovative approaches and practices are one area where local and regional communities represent a great potential and must play a major role.

Third, democracy. We must continue our efforts towards a new model of participatory democracy, based on strong and constant citizen participation and combining elements of direct and representative democracy. Local and regional authorities must introduce or increase elements of direct democracy in order to enhance citizen participation. Voters are sometimes more reasonable than politicians and feel more responsible for a longer-term development.

Active participation of citizens in community revival also means actively building partnerships between public authorities and non-governmental as well as private sectors, and pursuing co-operation both horizontally, with other local and regional authorities – including across national borders – and vertically, with other tiers of government, in order to benefit from the economies of scale. However, such inter-municipal and inter-regional co-operation should be encouraged on a voluntary basis and not imposed from a higher level.

From these three Ds, it follows that local and regional authorities must be recognised as fully-fledged stakeholders in the economic recovery and consequently be involved in decision-making on revival policies and strategies. Iceland is a good example to follow in this regard, where direct consultations between national and local authorities produced excellent results. Furthermore, regions and local communities must have their say in financial policy-making and become partners in national and European financial mechanisms.

Accordingly, national governments must involve local and regional authorities in consultations on national anti-crisis measures and policy development, to ensure the coherence between national and local responses.

This will represent crucial elements in a system of multi-level governance – a system of equal partnership between government levels as stakeholders in shared responsibilities – which should underpin the participatory democracy model of a new, post-crisis society.

I am convinced that with these elements in hand, we will be better equipped to come out of this crisis with stronger guarantees that the promise of democracy to our citizens will be fulfilled.

Thank you.