The MAXCAP Working Paper No. 33 “Local Government Debt and EU Funds in the Eastern Member States: The Cases of Hungary and Poland“ by Gergő Medve-Bálint and Dorothee Bohle has been published. You can download the Working Paper here.
The paper investigates whether local debt in East Central Europe is associated with the local government’s participation in European Union (EU)-funded projects. Drawing on data from Hungary and Poland, the authors find that in both countries the level of local government indebtedness is positively related to the local government’s performance in securing EU funds. In other words, being successful at attaining EU-funded projects leads to higher levels of local debt, other things being equal. This may undermine local finances and increase the financial vulnerability and dependence of local governments. The empirical evidence put forward in this paper is therefore in stark contrast with one of the main ambitions of the EU’s Cohesion Policy, which is to empower the local level relative to the central state.
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