Romanian Local Authorities Remain Quite Centralized - Fitch

Local authorities in Romania are still strongly centralized, even though EU accession, coupled with legislative changes in the past two years might have significant contributions in their efficient and effective decentralization, according to financial evaluation agency Fitch Ratings.

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"Romanian local governments have been going through significant changes over the past 10-15 years, making them more accountable to their own electorates. However, the high number of regulations affecting the institutional framework and the frequency with which legislation has been amended, replaced or abolished has represented a major obstacle to clearly set revenue-expenditure arrangements between the different levels of governments," said a Fitch report.

Analysts note that the involvement of central authorities in local activities remains insignificant.

“This limits the financial flexibility of local governments (the State controls the main revenue sources and expenditure drivers such as salaries),” said Fitch.

“Capital expenditure in the areas such as transportation, roads, waste/water/energy facilities, and urban renovation by local governments has been deficient and neglected for a number of years, despite financial assistance offered by multilateral banks such as the European Bank for Reconstruction and Development and the European Investment Bank,” Fitch added.

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