The financial crisis happened ten years ago, and yet, its effects are still felt throughout many local governments across Europe. They are under heavy financial pressure, and there is urgent need for public investment. However, investing at local level has been made very difficult.

Current national and European fiscal rules have effectively prevented investments in towns and regions: when local governments borrow, their investments count as national government debt. As Flo Clucas puts it, “both member states and the EU must realise that their fiscal rules have an impact on local governments”. These rules should be made more flexible. “Central governments should think twice about the consequences of their fiscal decisions on local governments.”

The need for more flexibility and decentralisation also made sense to the OECD. As the Deputy director of the center for entrepreunership, SMEs, Regions and Cities (CFE) of the OECD, Joaquim Oliveira Martins pointed out, “fiscal decentralisation has a positive impact on the economic performances of local investments.”

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