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EUROPEAN GOVERNANCE AND PUBLIC ADMINISTRATION REFORM
IN THE BALKAN STATES
Prof. Dr. Margarita SHIVERGUEVA Jean Monnet Professor of European Economic Integration New Bulgarian University Sofia, July, 2010
The term "governance" is a very versatile one. It is used in connection with
several contemporary social sciences, especially economics and political
science.
It originates from the need of economics (as regards corporate
governance) and political science (as regards State governance) for an all-
embracing concept capable of conveying diverse meanings not covered by
the traditional term "government".
Referring to the exercise of power overall, the term "governance", in both
corporate and State contexts, embraces action by executive bodies,
assemblies (e.g. national parliaments) and judicial bodies (e.g. national
courts and tribunals).
The term "governance" corresponds to the so-called post-modern form of
economic and political organizations.
According to the political scientist Roderick Rhodes, the concept of
governance is currently used in contemporary social sciences with at least
six different meanings: the minimal State, corporate governance, new
public management, good governance, social-cybernetic systems and self-
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organized networks 1( R. Rhodes, “The new governance: governing without
government” (1996), in Political Studies, Vol. 44, page 652).
The European Commission established its own concept of governance in
the White Paper on European Governance, in which the term "European
governance" refers to the rules, processes and behaviour that affect the
way in which powers are exercised at European level, particularly as
regards openness, participation, accountability, effectiveness and
coherence. These five "principles of good governance" reinforce those of
subsidiarity and proportionality.
European governance is about the principles and tools for decision-making
within the context of the multiple layers of players and decision-makers in
Europe — from the European Community, through the Member States, to
regional and local authorities and private parties. The coexistence and
intertwining of several governance levels clearly constitute unprecedented
challenges.
Five principles underpin Good European Governance. They underpin
democracy and the rule of law in the Member States, but they apply to all
levels of government – global, European, national, regional and local.
�� Openness. The Institutions should work in a more open manner. Together
with the Member States, they should actively communicate about what the EU
does and the decisions it takes. They should use language that is accessible and
understandable for the general public. This is of particular importance in order to
improve the confidence in complex institutions.
� �Participation. The quality, relevance and effectiveness of EU policies
depend on ensuring wide participation throughout the policy chain – from
conception to implementation. Improved participation is likely to create more
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confidence in the end result and in the Institutions who deliver policies.
Participation crucially depends on central governments following an inclusive
approach when developing and implementing EU policies.
� �Accountability. Roles in the legislative and executive processes need to be
clearer. Each of the EU Institutions must explain and take responsibility for what
it does in Europe. But there is also a need for greater clarity and responsibility
from Member States and all those involved in developing and implementing EU
policy at whatever level.
�� Effectiveness. Policies must be effective and timely, delivering what is
needed on the basis of clear objectives, an evaluation of future impact and,
where available, of past experience. Effectiveness also depends on
implementing EU policies in a proportionate manner and on taking decisions at
the most appropriate level.
� Coherence. Policies and action must be coherent and easily understood. The
need for coherence in the Union is increasing: the range of tasks has grown;
enlargement increased diversity; challenges such as climate and demographic
change cross the boundaries of the sectoral policies on which the Union has
been built; regional and local authorities are increasingly involved in EU policies.
Coherence requires political leadership and a strong responsibility on the part of
the Institutions to ensure a consistent approach within a complex system.
Each principle is important by itself. But they cannot be achieved through
separate actions. Policies can no longer be effective unless they are prepared,
implemented and enforced in a more inclusive way.
The application of these five principles reinforces those of
�� proportionality and subsidiarity. From the conception of policy to its
implementation, the choice of the level at which action is taken (from EU to local)
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and the selection of the instruments used must be in proportion to the objectives
pursued. This means that before launching an initiative, it is essential to check
systematically:
(a) if public action is really necessary,
(b) if the European level is the most appropriate one, and
(c) if the measures chosen are proportionate to those objectives.
The Union is changing. Its agenda extends to foreign policy and defence
migration and the fight against crime. It expanded to include new members. It will
no longer be judged solely by its ability to remove barriers to trade or to complete
an internal market; its legitimacy today depends on involvement and
participation. This means that the linear model of dispensing policies from above
must be replaced by a virtuous circle, based on feedback, networks and
involvement from policy creation to implementation at all levels.
Five political principles - openness, participation, accountability,
effectiveness and coherence underpin the European governance. They should
guide the Union in organizing the way it works and in pushing reforms forward
within the current Treaty, but they also provide markers for the debate on the
future of Europe. Together they allow better use of the principles of
proportionality and subsidiarity.
Building on these principles:
• · Structure the EU’s relationship with civil society. A code of conduct
for consultation will identify responsibilities and improve accountability of
all partners. It will enhance dialogue, and contribute to the openness of
organized civil society.
• · Make greater use of the skills and practical experience of regional
and local actors. In the first place, this is an issue for national authorities
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according to their national constitutional and administrative arrangements.
At the same time the Union should make fuller use of the existing potential
for flexibility to the ways European policies are applied on the ground.
• ·Build public confidence in the way policy makers use expert advice.
The EU’s multi-disciplinary expert system will be opened up to greater
public scrutiny and debate. This is needed to manage the challenges,
risks and ethical questions thrown up by science and technology.
• · Support the clearer definition of EU policy objectives and improve
the effectiveness of EU policies by combining formal legislation with
non-legislative and self-regulatory solutions to better achieve those
objectives.
By adapting governance at home, the Union will be better placed to
contribute to new forms of global governance. Policies and global
institutions must respond to popular concerns.
Main lessons of the European governance:
• Improving bottom-up involvement in EU policy shaping and
implementation. The response confirms that more openness and better
consultation are in both the immediate and the long-term interest of the EU, not
only for providing better policies but also for more efficient implementation.
Efficient transparency requires a proactive approach and cannot be limited to
access to documents. Involvement in policy- shaping should include national and
sub-national authorities as well as a broad range of non-governmental interested
third parties. The public response also confirms the need to review the role of the
Committee of the Regions and the European Economic and Social Committee in
terms of earlier involvement in Commission deliberations, better representation of
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sub-national authorities and civil society, and a broader proactive dialogue with
constituencies beyond specific consultations.
• Widening the choice of instruments to respond to new governance
challenges. The Commission enjoys support in its belief that there is a need for
a wider choice and more flexible policy tools within, and in addition to, traditional
legislation. The instruments available to the Community should be more
conducive to better implementation.
A better policy and regulatory framework thus establishes the conditions under
which legislative, as well as alternative approaches such as co-regulation or the
open method of coordination can be most appropriately and most effectively
used.
The choice of instruments should also build on a stronger factual base with ex-
ante impact assessments incorporating the evaluation of economic,
environmental and social consequences, a structured approach to the collection
and use of expertise, as well as consultation of the public and stakeholders, all
subject to transparency to allow public scrutiny.
• More focused European institutions with clearer responsibilities. This calls
for a clearer distinction between legislative and executive functions, and for
clarification and confirmation of the Commission’s executive functions vis-à-vis
Member States.
WHAT FORMS SHOULD MULTI - LEVEL
GOVERNANCE HAVE ?
Over recent decades, political authority and powers have become increasingly
dispersed in the European Union. European integration has deepened
considerably since the Single European Act in 1987. Simultaneously, there has
been devolution and a strengthening of local and regional democracy in a
number of Member States and candidate countries.
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Furthermore, many countries have liberalized service delivery and established
specific agencies to provide public services or contribute to policy
implementation. The complexity of the demands made on the public sector
underlies this trend of increased fragmentation.
The growing importance of “multi-level governance” and of the sub-national level
does not herald the decline of the nation-state. Important powers in redistribution
(welfare state) and macro-economic policy have remained firmly at national level
in all Member States. Fiscal policy, too, remains mostly a national matter.
While leading to complexity for the public sector, the fragmentation of powers
also offers new opportunities. The growing numbers of elected leaders at
regional and local level offer a source of democratic legitimacy. Regionalization
has often also enhanced political/administrative power at the intermediate level of
administrations.
The widely accepted view that decision-making processes in the Union should be
organized hierarchically must be dramatically revised. There must be a shift
away from the idea that only the European Commission and the State propose,
and the regional and local authorities dispose.
The sub-national, national and European levels must therefore be brought
together on an equal footing before decisions are taken, and not after. It is
therefore necessary to organize a permanent, and not just occasional, debate.
Cooperation is therefore needed as the working method for promoting links
between the various actors and establishing multi-level governance. The political
preconditions are: political will, information, the capacity and hence appropriate
training of regional and local administrations, and culture.
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Local and regional authorities are public authorities elected by universal
suffrage and democratically accountable for their political decisions and acts to
the citizens, by whom they are held to account, particularly at election time.
As the Council of European Municipalities and Regions (CEMR) rightly
indicated in its contribution to the White Paper, “European governance concerns
the European Union, but is not confined to the relationship between this body
and governmental and nongovernmental actors. It includes the whole network of
relationships between spheres of government, within and between the Member
States”.
But the term “governance” is somewhat vague. It implies, for all state or
other players, an overall framework of relationships and roles based on
precise rules, which may not, in any circumstances, lead to the only
legitimate procedures – i.e. democratic procedures – being circumvented.
Therefore, any system for creating a network of local and regional players with
the aim of better interlinking their actions for reasons of effectiveness,
transparency and legibility, bases this multi-level governance on democratic
forms of government.
At the same time, account should be taken of the fact that hierarchical, clear-cut
decision-making processes no longer work in complex, constantly changing
societies like ours.
Article 1 of the Treaty on European Union states that “this Treaty marks a
new state in the process of creating an ever closer union among the peoples of
Europe, in which decisions are taken as openly as possible and as closely as
possible to the citizen”. This is reflected in the preamble, which refers to a
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Europe in which “decisions are taken as closely as possible to the citizen in
accordance with the principle of subsidiarity”.
Paradoxically, however, in the Treaty, which de facto covers local and regional
authorities’ more specific competences, there is no reference to the principle of
proximity, and the principle of subsidiarity is limited, in Article 5, to relations
between the Community and the Member States.
Moreover, there is no detailed definition of subsidiarity in the Treaties, nor in the
protocol on subsidiarity and proportionality, the texts providing simply for the
application of the principle between the Community and the Member States.
There is thus clearly a contradiction:
–the European Union considers that decisions have to be taken at the closest
possible level to the citizen;
–but it makes no provision for resources to implement this principle, thus doing
nothing to facilitate transparency.
Consequently, the debate on multi-level governance is becoming difficult and
skewed in the sense that the participants choose the interpretation of subsidiarity
which favours them, often leading to a dialogue of the deaf.
Similarly, it must be noted that the decentralisation processes now being
carried out in the majority of Member States, the introduction of the principle
of subsidiarity at Union level and the influence of European regional policy with
partnership as a method of decision-making and management, are some of the
changes responding to increasing demands on public policies, from both sub-
state-level public players and civil society.
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Greater accessibility, effectiveness, transparency and democracy of the
Community project and European issues in general can therefore be achieved
through a greater involvement of regional and local authorities in Community
policies with a strong territorial impact. This would improve their perception by
the citizens.
As the need grows for transnational and interregional development along
with the European cooperation which must support it, many of the practical
difficulties encountered arise from the diversity of the administrative systems, the
differences in competences of the regions and a lack of clarity on the role of the
regions and local authorities in implementing European policies with an impact
on the development of local and regional areas. These blockages and confusions
will not simply fade away as the Union and its policies become increasingly
integrated.
What place does the regional level occupy in European systems
of government?
Incorporation of the regional level in the various national systems
UNITARY STATES DECENTRALISED
UNITARY STATES
REGIONALISED
UNITARY STATES
FEDERAL STATES
Only local level
infranational
hierarchy.
Regional levels may
exist
for administrative
reasons but are
subordinate to the
central state
States which have
undertaken a
process of
reform to establish
elected regional
authorities above
the
local level
Characterised by
the
existence of elected
regional
governments
with constitutional
status, legislative
powers
and a high degree
of autonomy
Power-sharing
guaranteed by the
constitution
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Greece
Ireland
Luxembourg
Portugal (2
autonomous
regions),
Bulgaria
France (26 regions)
Finland (1
autonomous
region)
the Netherlands
Sweden (4
experimental
regions)
Denmark
United Kingdom
(devolution)
Italy (20 regions)
Spain (17
autonomous
communities)
Germany (16
Länder)
Austria (10 Länder)
Belgium(3 regions,
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communities)
Increasing interdependence and Europeanization of public players
The economic crisis at the beginning of the 1970s revealed a state regulatory
function in crisis:
– on the one hand, the national/central level had very often become
too large-scale to ensure the differentiated, appropriate regulation
of societal problems. New multisectoral problems had increasingly
transgressed the functional specialization that had been
established within the political/administrative system;
– on the other hand, the state had become too small-scale a
regulator, less and less able on its own to deal with the increased
socio-economic interdependence connected with globalization and
the liberalization of world trade. Public intervention was increasingly
inadequate to deal with the real origins of many problems
(environment, research, the world market, communications,
macroeconomic convergence, conditions of employment,
conditions of competition, regional rebalancing, etc.).
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Faced with this dilemma, the European States embarked on a simultaneous
“double differentiation” of political systems:
– a process of increased territorialisation of public intervention (decentralization,
delegation of operational responsibility and clearer division of governmental
functions between the different organizations and/or administrative levels);
- a process of increased Europeanization of national policies.
The result of these major trends has been that all public action is now conceived
and implemented in the context of polycentric, highly complex networks of actors
that are characterized by considerable interorganisational dependency and
consequently create a growing need for coordination between the players
involved.
In practice, governments underestimate the resources needed to manage
international coordination – especially European coordination – of policies, and
its impact on all levels of territorial actors – a paradoxical situation in view of the
broad concerns about national sovereignty.
Growing Europeanization of national public policies
The gradual increase in the number of areas covered by Community Law over
the last fifteen years has meant increasing cooperation between the Community
administration and the national administrations at various levels.
However, one of the European Union’s specific characteristics is that its policy
formulation process is not a simple matter of negotiations leading to a definitive,
once-and-for-all decision. Rather, the formulation and revision of European
policies is an ongoing process.
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European integration has thus led to an increasing “Europeanization” of national
public policies:
– on the one hand, there is an inherent European dimension in practically every
national policy, which also enlarges the range of players who have an influence
on policy definition and implementation;
– on the other hand, the implementation of Community policies depends largely
on the management activity of national administrations, particularly as a result of
the Community administration’s lack of executive functions.
While the intensification of interinstitutional relations between Community bodies
and the Member States has become increasingly specialized and hence sector-
specific, other factors have led to greater account being taken of local and
regional aspects.
Indeed, faced with the scarcity of available resources (space, environment,
funding, administrative staff) and increased competition between regions, we are
witnessing a fundamental reorientation of regional and local development
strategies towards diversification, a better use of synergies to develop local
potential, and more sustainable development.
That is why the challenge, which has already been taken up in the form of the
development of the ESDP and the recommendations for its implementation,
consists of putting a coherent regional and local dimension back into the complex
procedures and processes caused by the Europeanization of public policies.
Implementation of Community policies: multi-level governance
The way the European political/administrative system works is particularly
complex because it incorporates not only the institutions of the European Union,
but also all the political/administrative systems of the Member States.
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All the phases (formulation, implementation, monitoring) are characterized by
continuous dialogue between the representatives of the Community institutions
and those of the Member States, marked by the trade-off between national and
Community interests.
In spite of the vertical sharing of responsibilities in implementing Union policies,
observers note an increasingly glaring “management deficit” at Community
administration level.
The origin of this deficit is often the fact that the States make symbolic
undertakings and grant new legal powers to the Community without providing for
the management capacity necessary to implement them.
As for the Community approach in matters of coordination, especially by the
Commission, it is extremely weak and has no practical effect, because the
political/administrative culture of the Community bodies is essentially sectoral
rather than having overall coherence.
INSTRUMENTS AND PROCEDURES FOR COORDINATING
THE MEMBER STATES’ TERRITORIAL DEVELOPMENT
POLICIES
In practice, the Member States have put in place formal coordination structures
and procedures in line with their institutional and territorial organization or their
administrative tradition. The aim of these structures is better spatial coherence of
public policies.
· At national level, certain countries have formally set up interministerial
committees or other specific administrative structures within the government with
the task of promoting intersectoral coordination. Examples of such structures
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are the “Rijksplanologische Commissie” in the Netherlands, the “DIRECCÃO-
GERAL DO ORDENAMENTO DO TERRITÓRIO E DESENVOLVIMENTO
URBANO” (DGOTDU) in Portugal, and the “Comité interministériel
d’aménagement et de développement du territoire” (CIADT) and “Comité
interministériel à la ville et au développement social urbain” (CIV) in France. In
theory, the Member States which draw up spatial plans at national level or have
an explicit territorial policy should also be able to achieve a high degree of
intersectoral coordination. One of the main reasons for this is that these
documents, which are generally subject to a formal adoption procedure, normally
contain an integrated development perspective for the whole of the country and
priorities for public investment (infrastructures and other public investment). In
this context, a number of countries have thematic territorial plans which are, in
fact, the translation into spatial terms of certain sectoral policies and are drawn
up jointly by the spatial planning authorities and the authorities responsible for
the sectoral policy concerned. Examples of these are the “Structuurschemas” of
the Netherlands, the “Schémas de services collectifs” in France or the
“Fachpläne” in Germany.
· At regional level, many Member States have bodies or procedures which
attempt to coordinate territorial development both, horizontally or vertically. It is at
the regional level that there has been an increase and/or significant modification
of the intersectoral mechanisms and coordination procedures over the last few
years. However, an important condition for this is the existence of a sufficient
degree of decentralization of responsibilities, which is the case for many member
countries. In a number of countries, this task is the responsibility of devolved
state bodies: in Portugal the task is carried out (in part) by the Regional
Coordination Committees (CCRs) and in Greece by the Secretaries-General of
the regions. In France, the regional prefectures play a non-negligible role in the
territorial coordination of state policies in the region concerned, but the Regional
Councils coordinate their own policies. The problem is thus more a problem of
coordination between the policies of the State and those of the region applying to
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the same territory. Strategic plans at regional level may play an important role in
vertical coordination within the regions, because they have the function of
“guiding” the activities of the lower administrative echelons such as provinces,
departements, cities and municipalities.
· At local level the mechanisms of intersectoral coordination of policies are less
formalized. Local planning instruments must be in conformity with the plans of a
higher administrative level and often depend, in their implementation, on other
specialized agencies.
The various national examples suggest that the success of any attempt to ensure
spatial consistency between public policies is mainly dependent on the following
factors:
– the existence of a basic agreement established at the political level on the
major objectives;
- the institutional system of territorial policy within the political/administrative
system and the quality of procedures set up to settle conflicts or establish a
consensus;
– the availability of political and financial resources to organize communication
and put in place processes to seek consensus and compromise.
This shows that major progress is still to be achieved in many Member States in
the territorial coherence of public policies. In some, the political position of the
central bodies for spatial planning is relatively weak compared to that of other
sectoral ministries. However, vertical relations between the various levels are not
always very harmonious, so that the principle of “reciprocity” (bottom-up and top-
down), understood as a process allowing policy priorities and their territorial
impact to be gradually and continually harmonized, is not generally a friction-free
process.
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COOPERATION AND COORDINATION OF NATIONAL POLICIES
As the Union embarks on a phase of “active” integration, the practical need for
convergence between the Member States is making itself felt afresh. And this
calls for closer harmonization of legislation or new forms of collective action on
top of the “passive” integration, focused on eliminating internal barriers in the
Community that has long been the mainstay of its success.
What is known as the “open method of coordination” is one such new form of
collective action to foster compatibility, consistency or convergence between
Member States’ public policies. Covering a variety of arrangements, it stands half
way between pure legislative integration and straightforward cooperation.
Recent experience has shown that the instruments it offers can be effective in
furthering European integration.
European integration involves a complex mix of policy-making methods,
instruments and institutions. Its development, however, is dictated not by a
ready-made blueprint but by a dynamic process of competition between tools for
integration all tending towards the Community method. This method, with the
underlying interplay between the institutions, is what makes the European model
of integration unique.
The competition between the various tools is reflected in the sharp distinction
between “regulatory” policies, which are typically rather technical and highly
efficient (e.g. market regulation), and “distributive” policies, which are traditionally
the preserve of national and subnational authorities. It is also reflected in the shift
from “passive integration” (Scharpf, 1996), where the principal aim is to eliminate
barriers to the establishment of the single market, to “active integration”, where a
combination of different instruments is deployed, harmonization of national
legislation being but one of many. This shift signals the Community’s entry into
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fields of activity that are far more political and go closer to the heart of national
sovereignty.
Here the place of common rules may be taken by other, more flexible
instruments that give precedence to cooperation or coordination (depending on
the objectives, the nature of the area in question and its “European maturity”).
The aim is to secure a desired degree of convergence or compatibility between
national policies to implement agreed objectives on matters of common concern.
In other words, “[the] success [of the political construction of Europe] has been
dependent on the ability to combine coherence with respect for diversity and
efficiency with democratic legitimacy. This entails using different political
methods depending on policies and the various institutional processes. For good
reasons, various methods have been worked out which are placed somewhere
between pure integration and straightforward cooperation (Council of the
European Union, The ongoing experience of the open coordination method, Note
of the Portuguese Presidency of the Union, 9088/00, 13 June 2000, p. 4.).
The coordination of national policies, now known as the “open coordination
method”, occupies an intermediate place between intergovernmental cooperation
and the adoption of common rules. Recent experience shows that it can offer
valuable instruments for integration.
The current forms of cooperation and policy coordination among the EU Member
States comprise a variety of instruments designed to foster compatibility,
consistency or convergence of national choices with a view to deeper
European integration.
Compatibility means making sure that Member States’ own policy decisions do
not seriously harm other Member States or jeopardise the achievement of other
European goals. To take tax and social security, for instance, the balance
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between the requirements of the single market (freedom of movement of goods,
services, capital and persons) and the diversity of national public revenue
systems is very delicate. It can be upset by “harmful” tax competition, which
therefore has to be curbed. In areas where unanimity is required, it can be
difficult to secure the adoption of Community directives. Here, cooperation
between the Member States can help to ensure compatibility between national
choices by using other tools besides legal instruments. These combinations
reflect the wide range of objectives and legal bases available.
Consistency involves the additional dimension of strengthening and mutually
boosting the effectiveness of the national policies concerned, going beyond a
simple striving for compatibility. Economic policy is one example. Here,
consistency between national systems is a corollary of monetary union and has
to be ensured because of the impact that national economic policies can have on
the rest of the Union when there is a single monetary policy (See: Pedro Solbes,
“Euro: coordonnons nos politiques économiques”, in Les Echoes, 18.03.01).
The goal of consistency is enshrined in the Treaty in the formula: “Member
States shall regard their economic policies as a matter of common concern”
(Article 99 Treaty establishing the European Community). It is pursued in
particular through the adoption of an economic coordination system, the broad
economic policy guidelines (BEPG), based primarily on the principle of
periodic definition of objectives and “peer review”.
The concept of consistency of national policies therefore includes their
coordination at Community level towards objectives defined by mutual
agreement. Closer national policy coordination can thus set in motion
convergence towards those objectives. The countries taking part do not
necessarily converge towards a single model or to common methods: rather,
they are striving towards identical goals, but are free use by different procedures
and means to achieve them.
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In principle, some subject areas require a single rule implemented uniformly
throughout the Community: here, national policy convergence is not an accurate
description, since separate national policies disappear and are fused under a
single rule. Examples are the prohibition of national customs duties and the
adoption of a Common Customs Tariff, or monetary policy, which is decided
solely by the European Central Bank (ECB). The same is true in areas where the
Community enjoys exclusive competence and has exercised those powers. The
common rules adopted by the Community under the common commercial policy
(goods) or the common policies on transport, agriculture and fisheries deprive the
Member States of the right to legislate and make agreements with non-member
countries on matters governed by such rules.
When we speak of new forms of policy coordination, we are thinking, then, of the
fields covered by the open coordination method (OCM) defined by the Lisbon
European Council.
Closely modelled on employment policy coordination, the new method offers “a
means of spreading best practice and achieving greater convergence towards
the main EU goals. This method, which is designed to help Member States
progressively develop their own policies, involves: fixing guidelines for the Union
combined with specific timetables for achieving the goals which they set in the
short, medium and long terms; establishing, where appropriate, quantitative and
qualitative indicators and benchmarks against the best in the world and tailored
to the needs of different Member States and sectors as a means of comparing
good practice; translating these European guidelines into national and regional
policies by setting specific targets and adopting measures, taking into account
national and regional differences; periodic monitoring, evaluation and peer
review” (Articles 126 and 128 EC). The OCM is a flexible instrument, leaving it to
the Member States to implement coordination defined at European level and so
respecting the diversity of national systems while introducing some degree of
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continuity between Community and national arrangements. That is why it is
termed the “open” method. Moreover, it is implemented differently in different
fields: hence the tendency to speak of open coordination methods, in the plural.
The administration cannot function effectively without a clear vision on the
institutional building of the administrative structures in the Balkan States. At this
stage the main priority of the reform in the administration is its optimization at
central, regional and municipal levels through modernization and organizational
development. The creation of new administrations, the restructuring of existing
ones, the closing down of ineffective structures and units, their optimization, as
well as their organizational development are not aimed at achieving a larger, but
a better organized, more effective and politically neutral administration.
Reforming the public sector in the Balkan States is a complex matter. EU
member and non-member countries are facing increasing challenges to
make change happen. Adopting innovative reforms to respond to social
demands is no longer enough; governments need to accompany their
reform proposals with strategies to manage change. Managing change
determines, to a large extent, the success or failure of a reform initiative.
The principal focus of change is the administrative culture as the traditional
values, priorities, routines, and above all mindsets in public organizations are
under pressure. The extent of change, however, remains unclear.
The present paper concludes that although the notion of receptivity provides an
approach to analyze and explain change in government, it lacks explanatory
power to determine whether change has actually happened. Furthermore, it
states that the European Union countries are underestimating the importance of
managing change when designing and implementing policy reforms in the Balkan
States.
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That is because the instruments used to manage change are more a casuistic
characteristic of policy formulation than a conscious strategy to deal with the
effects produced by the implementation of reform proposals. There is no
evidence of a coherent strategy to manage change that accompanies the reform
efforts.
Introducing change into the public sector is highly controversial and complex as it
affects, directly or indirectly, the interests and way of living of members of
society. Public and private organizations cannot avoid changing, if they are to
survive in a more globalised, highly interdependent and fast changing world.
Public sector reforms are complex, in many cases unpopular, contested, fraught
with risk, and require long time to produce results and prove their benefits. This
fact begs the question of how to maintain legitimacy, increase support, sustain
the impetus for reform and avoid continuing losing people’s trust while
introducing controversial but necessary reform initiatives. Effective management-
of-change techniques should contribute to keep up the momentum for reform
while overcoming any opposition to change.
Factors leading to resistance to change
� Lack of coherence of the reform and consistency with other reform initiatives
may produce confusion and generate opposition.
� Fear and uncertainty of new work environment generate opposition to a reform
initiative.
�The negative implications perceived by individuals and groups may trigger
resistance to change.
23
�The complexity of a reform initiative may result in opposition, if it is not clearly
explained by leaders and managers and understood by all.
� Imposition of change may generate opposition towards the reform initiative.
�Change may be perceived differently by people at different levels of the
organization.
�The reduction of the importance of the human factor in the process of change
� Lack of information and communication may increase uncertainty and distrust
causing resistance to change.
Administrative simplification
The challenge for governments is, on one hand, to balance their need to use
administrative procedures as a source of information and as a tool for
implementing public policies, and on the other, to minimize the interferences
implied by these requirements in terms of the resources demanded to comply
with them.
Administrative simplification is currently high on the political and policy agenda in
most countries. It is one of the most effective methods for fighting against
regulatory complexity and inflation. Governments are facing increasing and
changing challenges and, in response, regulatory activities multiply red tape.
There are many advantages in cutting red tape and maintaining administrative
requirements better adapted to real needs and circumstances.
Three key benefits should be underlined:
24
i) innovation can be encouraged through efficiency gains,
ii) entrepreneurship can be favoured by fewer administrative burdens,
releasing resources otherwise devoted to red tape, and
iii) better public governance can be attained with more effective tools
available for policy implementation.
Visibility of cutting red tape policies has also been of support when launching
reform. Administrative simplification can be very appealing politically as
governments can gain constituency by reducing administrative costs to
businesses and citizens, thus promoting a proactive and business enabling
environment.
Challenges ahead
Defining and identifying challenges for administrative simplification is not an easy
task since they link to broader policy issues that are difficult to tackle
simultaneously. The main objectives in cutting red tape should be to improve the
efficiency of administrative processes needed to undertake economic and social
activities, provide a co-operative relation between public administration and
citizens, and minimize cost interferences to businesses and citizens. Some of the
key challenges to meet these objectives are:
Build a constituency for administrative simplification. Without support from
a network of partners at a high political level, but also at a technical level, reforms
might not attain expected goals. This support should not be taken for granted and
needs to be gained.
�Effective and efficient use of capacities and resources available
Consideration of opportunity/cost and benefit/cost analysis of reforms are needed
to rank priorities.
25
� Manage institutional and organizational needs. Administrative simplification
is not embedded in the mandate of all government institutions; it needs to be
pushed forward in a co-ordinated manner.
The establishment of administrative simplification units inside government and
outside taskforces can help with co-ordination and keeping up the path of
reforms.
� Ensure sound multilevel governance. Uncoordinated government efforts at
different levels of government might multiply the adverse effects of red tape. The
approach should take into account that even though administrative requirements
emanate from different institutions, the end user should be able to address all
responsibilities using a common information source.
� Involve all stakeholders fairly in administrative simplification strategies.
All relevant stakeholders and affected parties should be able to be involved in the
administrative simplification reforms. This can also contribute to gaining
constituency.
� Develop and improve measurement and evaluation mechanisms. The
relevance of this challenge is two-folded: first, the strategies already in place
need to be evaluated to ensure that their objectives are met, and second, there is
still a lack of information on how red tape strategies impact and benefit public
interest.
Administrative simplification strategies
Simplification strategies in Balkan States are designed to improve the efficiency
of transactions with citizens and business without compromising regulatory
benefits. These strategies are complex schemes for administrative simplification
efforts and should have a long-term and “whole-of government” perspective.
They need to be well thought through and be clearly defined by
26
establishing measurable objectives, resources, timing, outcomes, and
monitoring and evaluation mechanisms. Strategies or program often prioritize
specific sectors or policy areas, but as achievements come, other areas also
start to undertake reform. The trend should lead towards a comprehensive
approach to reduce the risk of creating administrative gaps between
different sectors of activity or government entities.
Strategies normally follow sequential phases: planning, consultation, design,
implementation and evaluation:
� Planning. This is the first part of the process to set up a strategy for
administrative simplification. Planning requires a preliminary identification of
policy objectives, resources, capacities and tools to be used. During this phase,
government officials have to sketch the way they want to achieve objectives in
the most efficient manner (at lowest cost), and the most effective way (achieving
defined objectives).
� Consultation. It is necessary to consult with stakeholders to gain political
support. This phase of the project is essential to create constituencies for the
strategies to be implemented. Consultation is important not only to echo the
concerns expressed by stakeholders, who should be reflected in the strategy per
se, but also to make the strategy relevant and viable in the medium and long
term. Political support is fundamental to create momentum for reform and
sequence the reform in the most appropriate way.
� Design .In this phase objectives, timing and resource allocation are
established. The design phase should include variables that can be measured
over time in relation to specific outcomes. The design phase provides an
opportunity to indicate clearly how policy objectives will be achieved, assessing
the different variables that can interfere during the subsequent phases of the
27
process. The tools to be used for simplification have to be integrated in the
different stages of the project.
� Implementation. The tools for simplification are put into practice. It is time to
review simplification tools focused on administrative provisions, improving
guidelines for administrative regulation, communication mechanisms, incentives,
etc.
� Monitoring and evaluation. This is an important element of the process that
should be planned right from the inception of the project in order to know,
whether the policy strategy really contributes to the achievement of the desired
objectives. Progress monitoring can contribute to assess how institutions
participating in the project perform and could be able to improve the simplification
strategy implementation. Techniques to monitor and evaluate include the use of
quantitative and qualitative tools to measure administrative burden reduction.
Some of the key elements of a simplification strategy can be gathered in
three areas: simplification targets, institutional framework and tools
available.
1. Targeting simplification efforts
A complete strategy requires defined objectives in qualitative and quantitative
terms within a given timeframe, to avoid ideas that are too broad as well as
imprecise declarations of intentions. For instance, the 25% reduction target
proposed by different European countries to be obtained in a determined period
of time is a solid target that helped move reform ahead. Defining priorities can be
complemented by identifying targeted groups and the impacts of red tape on
these. For instance, most of the administrative simplification efforts have
concentrated on business and, in particular, small and medium enterprises.
Targeted groups can also be citizens and the public administration itself.
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2. Definition of institutions, responsibilities and co-ordination
mechanisms
A consolidated strategy for administrative simplification includes an institutional
framework. Different government departments and other outside stakeholders
share responsibilities to design, implement, supervise and measure outcomes of
the strategy.
3. Tools to develop and implement the strategy
Experience shows that there are different tools to be used in isolation or in
combination. The selection of these tools is determined by political and
administrative issues and not all of them are effectively applicable everywhere.
These tools can be included in five categories: better regulation, organizational
improvements, ICT implementation, better information and enhanced coherence
among administrative requests.
Elements promoting administrative simplification strategies in
EU Member States
1 Domestic: reflecting interests and pressures from business and civil
society
Administrative simplification strategies respond to real domestic concerns.
Simplification of citizens` lives and business activities has become a common
demand in many countries as the complexity of the government` s procedures
increases and regulations are difficult to understand and to comply with.
Complaints from businesses are widespread and they reflect the workload that a
29
burdensome regulatory system can impose on them. Citizens can also be
affected by paperwork and regulations that are not clear, transparent and
effective.
In most EU-27 countries businesses and citizens (to a lesser extent) have played
an important role in advocating and lobbying to simplify administrative
procedures. This has been one of the main domestic drivers to introduce and
implement simplification strategies by governments. The test governments have
to pass is related to the effectiveness of such strategies and the mechanism
they can set up to establish and foster fluid consultation and communication with
stakeholders.
Administrative simplification program are not free from political pressure but a
well designed and implemented approach will resist being influenced by political
interests. The advantage of launching simplification strategies that bring specific
results is that the benefits cannot be reasonably opposed by anybody. The
difficulty is to sustain these benefits over time and to integrate them in broader
program that improve the quality of the new regulation that accumulates over
time.
2 External: making national economies more competitive
One of the key elements that count for competitiveness is the degree to which
the regulatory environment facilitates economic activity, attracts investment,
increases trade, creates jobs and promotes competition. A common element in
this list is the importance to keep administrative requirements to a minimum
without imposing charges and barriers that only hamper and discourage
entrepreneurship and to maintain a sound regulatory framework that is clear,
transparent and understandable.
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All Balkan countries face external pressure to introduce and implement strategies
for administrative simplification. This pressure refers not only to those directly
linked to the globalization of the economic activity but also to the need to
compete for investment and capital. Being ranked in international benchmarkings
also creates incentives to eliminate burdens and reduce red tape. In many
Balkan countries donors have also played an important role in promoting
administrative simplification conditioning financial support on targeted measures
in that domain.
Barriers to administrative simplification strategies in Balkan
States
Strategic barriers
� The lack of high political support is probably the first issue practitioners
think about when they are asked about barriers.
� Resistance to change is related to the first barrier, though this resistance
refers mainly to lower levels of government, and even outsiders to government.
In these instances resistance can come either from technical and operational
levels within the administration or from the general public. This resistance is
usually related to lack of understanding of the reform proposals, a perceived
threat to traditional administrative culture and vested interests.
Reform, in general, meets with resistance due to incertitude and potential
privilege losses.
� Lack of a comprehensive whole-of-government administrative
simplification strategy makes change difficult. Limited program bring progress
but leave gaps behind. A broad strategy can help co-ordinate different reform
31
program focused on concrete policy areas or sectors to reach common far-
reaching goals. An overarching strategy can also facilitate capacity building and
transmission of know-how among government departments. This barrier is
greater, if an effective communication strategy is also lacking.
� Limited resource availability is a burden affecting management in general.
Priorities compete for resource allocation also in public governance. Cutting red
tape might be an expensive policy option, and its benefits, though demonstrable,
are difficult to collect since they are translated into efficiency gains throughout the
economy. Political support and thus sufficient resources are needed to obtain
and bring these benefits to society. This limitation is usually greater in developing
and emerging economies. Furthermore, resource availability might be
conditioned to aid management cycles, meaning that ambitious program for
reform run out of steam despite efforts are starting to harvest results if funding
becomes unavailable, making reforms unsustainable for national and local
governments.
� Lack of co-ordination in an administrative simplification strategy obstructs
coherence, multiplies costs, and creates gaps between policy areas and sectors.
Unclear division of responsibilities, ineffective communication and lack of co-
operation mechanisms in place, and conflicting powers are some of the reasons
behind this particular obstacle. This is especially relevant in complex institutional
contexts.
Technical barriers
� Legal complexity reduces compliance and enforcement capacity. This is
important because laws and regulations determine and shape the administrative
environment. Legal complexity might result from deficient legal review
mechanisms to improve and adapt to societal, technological and economic
32
changes. This problem might be larger in contexts with different legal heritage.
Legal complexity might become an unsolvable challenge, if regulatory
management frameworks are too burdensome and resistant to change. Laws
may need to be changed as part of the simplification process.
� Lack of human skills and capacities. Administrative simplification is not
inherent to any public administration therefore special skills and capacities need
to be built upon. Often there is a mismatch between the needs of public
administration and available training facilities and program. Specific training
capacities should be developed. Having an insufficiently skilled and ill-equipped
team working on administrative simplification will likely prevent governments from
meeting ambitious expectations.
� Lack of understanding of the use of administrative simplification
generally inhibits participation and compliance by the parties involves.
Administrative simplification is a difficult-to- understand and restrictive term. It is
usually confused with the improvement of the public administration structure,
overlooking the cutting red tape aspect. This lack of understanding also limits the
possibility of building constituency and a sense of ownership among relevant
stakeholders potentially affected by the strategy.
� Lack of information and data. Blindly designed reforms undertaken without a
comprehensive understanding of reality and its changes are generally doomed to
fail and perhaps make things worse. In some cases information is available, but
effective data-collection or sharing mechanisms might not be in place. Economic
data is generally relevant for administrative simplification strategies, but
information such as a complete assessment of government requirements, the
time-cost needed to comply with them, and an estimation of the number of
potential compliers is also important.
33
�The digital divide means that segments of the population of both, the EU and
the Balkan countries, enjoy limited access to ICTs. This impedes them to fully
benefit from the development of an information society and limits access to
improved and simplified e-government services. Before investing much effort in
ICT for administrative simplification access to electronic means by end users
should be assessed.
� Lack of standardization of procedures might contribute to create confusion
and promote discretion, and thus potential discrimination and corruption. Lack of
guidelines, defining conditions that should be respected by administrative
procedures can hamper predictability and coherence of an administrative system
as a whole.
�Lack of measurement and evaluation mechanisms. Administrative
simplification strategies should set clear objectives and targets. Measurement
mechanisms are then needed to assess performance and target achievement.
Furthermore, evaluation mechanisms can promote benchmarking of public
institutions and thus encourage involvement through greater competition. At the
same time, cooperation can also be encouraged since evaluation highlights
elements where progress is possible.
EU economic situation and main governance challenges
The economic recession came to an end in the EU in the third quarter of last year
in large part thanks to the exceptional anti-crisis measures put in place under the
European Economic Recovery Plan but also supported by some other temporary
factors. Beyond the initial rebound, the recovery is proving more difficult than in
the past. This is not surprising given the nature of this crisis. Cyclical rebounds
following financial crises tend to be more muted than in other circumstances.
Moreover, this was a global financial crisis, the biggest since the Great
34
Depression. Like other developed countries, the EU will grapple with its legacy
for some time to come.
The EU economy will thus continue to face headwinds from several directions.
The soundness of financial markets has yet to be solidly re-established. Whilst
clearly gaining strength, the banking sector still seems fragile and further
significant losses cannot be excluded. The necessary deleveraging of banks
takes time, and the cost of capital for banks is unlikely to return to its pre-crisis
level. The deleveraging of households and firms also has some further way to go,
effectively putting a brake on investment. Moreover, despite apparent signs of
stabilization the labour market situation will remain weak. The adverse impact of
the financial crisis on potential output growth points to other supply-side
constraints going on.
EU economic situation in 2009/2010
Overall, EU GDP growth is expected to remain rather subdued during the first
three quarters of 2010, on average, and to regain ground only by the end of the
year. This follows from, in particular, the fading impact of the temporary support
that kick-started the recovery (both within the EU and outside). A temporary hike
is expected in the second quarter, however, reflecting in large part a technical
rebound in the construction sector that was depressed by unusually adverse
weather conditions during this winter. As both external and domestic demand
gradually strengthen, GDP growth could recover to about 0.5 per cent q-o-q
during 2011 in both, the EU and the euro area. Taking into account the easing in
activity towards the end of 2009 (limiting the so-called carry-over to 0.2 per cent
in the EU), annual growth rates of about 1 per cent are expected in both regions
this year. For 2011, GDP growth could accelerate to, or just above, 1.5 per cent
thereby starting to slowly close the sizeable output gap that opened up during the
recession.
35
While all EU economies were hit by the crisis there are important
differences between them. Factors explaining the divergences include trade
openness, exposure to the financial-sector disturbances and the existence of
sizeable internal and/or external imbalances. Looking forward, the recovery is
expected to advance at different speeds reflecting the challenges individual
economies face and the policies they pursue. Mounting concerns about fiscal
sustainability, especially in some euro-area Member States, which cause
increased turbulence in government-bond markets and differences in
competitiveness positions are among the most important challenges in this
regard.
Euro area
According to euro area real GDP data the decline rate in the fourth quarter of
2009 slowed down to -2.2 per cent on an annual basis (against -4.1 per cent in
the third quarter). The last year saw a GDP fall of -4.1 per cent, the greatest
reported since 1999. On a quarterly basis GDP remained unchanged, with the
breakdown by component showing that investment had a negative contribution,
while the contribution of net exports and inventories was positive. As regards
private and public consumption, no changes were registered compared with the
previous quarter level. During the first quarter of 2010 major euro area indicators
went on increasing, while the economic sentiment index and the EC business
climate indicator increased to 97.7 (prior value of 95.9) and -0.32 (prior value of -
0.65) respectively in March. PMI were above the threshold of 50, signalling an
expansion of economic activity. During the same month the PMI Composite
came to 55.9 (prior value of 53.7). As a result of the anti-crisis measures and the
gradual improvement in external environment, a moderate recovery in euro area
economic activity was observed. According to the ECB forecast of March 2010,
this year’s GDP growth is expected to move within the range of 0.4–1.2 per cent,
while in 2011 - within the range of 0.5–2.5 per cent. Expectations about the next
36
year underwent a minor upward revision reflecting the global improvement in
economic activity.
EU countries, non-members of the Monetary Union
GDP decline in EU countries, non-members of the Monetary union, moderated in
the fourth quarter of 2009 and the reported overall drop came to 1.5 per cent on
an annual basis (against 3.7 per cent during the previous quarter). Investment in
fixed capital continued their strong negative contribution to growth, although this
effect tends to subside during the year. Private consumption also exhibited a
slight improvement. Positive signals were also seen in terms of exports which
increased on an annual basis in Romania, Hungary, the Czech Republic and
Bulgaria.
GDP Growth on an Annual Basis
I II III IV 2009
Poland 0.9 1.2 1.2 3.3 1.7
Czech
Republic
-3.9 -5.2 -5.0 -2.8 -4.8
Bulgaria -3.5 -4.9 -5.4 -5.9 -5.0
Hungary -6.7 -7.5 -7.1 -4.0 -6.3
Romania -6.9 -8.7 -7.1 -6.5 -7.1
Estonia -15.0 -16.1 -15.6 -9.5 -14.1
Lithuania -13.3 -19.5 -14.2 -12.8 -15.0
Latvia -17.8 -18.4 -19.0 -16.0 -18.0
Source: Eurostat.
The Balkan Region
37
During the last quarter of 2009 most Balkan countries reported a slowdown in
GDP decline, while Turkey and Macedonia were the first ones with positive
growth on an annual basis. In Turkey private consumption, government
consumption and inventories contributed most to the positive 6 per cent growth in
the fourth quarter of 2009 (by 3.3 percentage points, 2.3 percentage points and
2.5 percentage points respectively). Macedonia also posted growth in
consumption (1.5 per cent on an annual basis). Unlike Turkey, where investment
had a negative contribution, in Macedonia low growth of 0.3 per cent on an
annual basis was reported. Inflation kept accelerating in the first quarter of 2010,
due mainly to the base effect of fuels.
Economies in the region are expected to recover gradually in the second and
third quarters of 2010. Enhanced external demand, predominantly on the part of
leading European economies, will remain the major factor behind this.
Real GDP Growth in Balkan Countries
2008 2009
I II III IV TOTAL I II III IV TOTAL
Growth (on the corresponding period of previous year, %)
Bulgaria 7.0 7.1 6.8 3.5 6.0 - 3.5 - 4.9 - 5.4 - 5.9 - 5.0
Greece 2.7 2.7 2.0 0.7 2.0 - 1.0 - 1.9 - 2.4 - 2.5 - 2.0
Macedonia 6.4 7.9 6.4 1.2 4.8 - 0.9 - 1.4 - 1.8 1.2 - 0.7
Romania 8.2 9.3 9.2 2.9 7.3 - 6.2 - 8.7 - 7.1 - 6.5 - 7.1
Turkey 7.0 2.6 0.9 - 7.0 0.7 -
14.5
- 7.7 - 2.9 6.0 - 4.7
Croatia 4.3 3.4 1.6 0.2 2.4 - 6.7 - 6.3 - 5.7 - 4.5 - 5.8
Serbia 8.8 6.3 4.6 2.9 5.5 - 4.1 - 4.2 - 2.3 - 1.6 - 3.0
Sources: Statistical institutes and central banks of respective countries.
38
Budgetary policy objectives: efficient allocation of
resources subject to fair distribution of income and
stable macroeconomic environment
Short-Term Budget Reform Recommendations
1. Stronger top-down budgeting should be introduced in the budget
preparation phase. This will be work in progress, since in order to establish
good top-down ceilings, good estimates of baseline costs are necessary as
discussed below. A second element of good top-down ceilings is to ensure
effective policy attention regarding the ceilings from the Prime Minister and
Cabinet. This involvement should both include a discussion of overall ceilings as
well as funds allocated to new initiatives - budget requests for strategic policy
issues. At this point, ceilings should probably be flexible rather than "binding" in
order to allow for adjustments by government to meet policy needs.
2. Establish binding commitment controls for all budgetary institutions.
Expenditure control in Greece has been focused on the review of the Fiscal Audit
Offices on the legality and propriety of expenditure, not on budget control. Budget
execution should be delegated to line ministries, subject to controls on
commitments to ensure that their expenditures remain within approved budgets.
Ministers and/or budget managers should be legally prohibited from exceeding
budget authority. Monthly reports on commitments should be provided to the
Ministry of Finance. The Ministry of Finance should review the monthly reports on
commitments to identify problems in sufficient time to allow for their correction.
3. Improve the timeliness and reliability of budget execution reports.
Increased emphasis should be placed on producing timely accurate budget
execution reports. All budget institutions should be held accountable for
39
producing accurate reports. The Ministry of Finance should review the accuracy
of the reports and regularly report on any problems identified.
4. Develop accurate high quality baseline estimates for the budget. Baseline
estimates are the yardstick against which budgetary policies are measured.
Baselines depend upon reliable economic forecasts, informed estimates of
demographic changes, and accurate estimates of program costs. Baseline
estimates are prerequisites for expenditure ceilings and medium-term
expenditure frameworks. It is not possible to move to binding top-down ceilings,
until reliable baseline estimates are available.
5. Review and reallocate Ministry of Finance staff to functions that add
greater value. Skills and training of budget staff in the Ministry of Finance do not
fit the analytical and program review functions needed for more policy focused
budget control. Staffing should be reallocated as appropriate to expand the
budget analysis staff of the Ministry of Finance in issue areas such as social
security, health and revenues that have significant budget impact.
Medium-Term Budget Reform Recommendations
Reforms over the medium-term are intended to establish a sound foundation for
public financial management. Realistically, most of these changes will require
several years to fully implement. The Greek government, The Bulgarian and the
Romanian governments should develop plans for a phased approach to
implementation. Some of the changes may require legislation.
1. Fiscal rules: Greece, Bulgaria and Romania should commit to monitorable
fiscal policy objectives. The fiscal rules should be incorporated in law should
comprehend all fiscal activity of the Greek public sector, should be based on
accurate, reliable budget assumptions, should be open and transparent, and
should be reflected throughout the budget procedures.
40
2. Medium-Term Fiscal Framework: The budget documentation should present
multiyear estimates (year t+2 and t+3) reflecting the strategic goals and
objectives of Government. The estimates should be supported by baseline
calculations reflecting current policy. The estimates should be allocated by
Ministry and serve as the basis for top-down budget ceilings. Program changes
should be measured against this medium-term framework.
3. Parliamentary Budget Office: Parliament should take a stronger role in
reviewing the budget, supported by access to analytical resources of a
parliamentary budget staff body. The establishment of a budget research unit
within the Parliament should be considered. The parliamentary budget staff
should serve as an independent check on the accuracy and reliability of
government budget estimates. The presentation of the budget on a program
basis will present more transparent information to the Parliament; the budget
documentation will contain program objectives and performance indicators. This
should serve as the basis for parliamentary program review.
4. Program budgeting: Priority should be given to implementing a program
budget with a focus on policy objectives, and supported by performance
measures. The budget system should address the quality of expenditure, review
program results, and address value for money. Some input controls and caps on
administrative expenditures could be maintained as in most Balkan countries.
The use of performance information to support budgets for programs based on
quantitative indicators should be implemented where appropriate (e.g.
universities).
5. Comprehensive budget: The comprehensiveness of the budget should be
increased. Subsidies and borrowing from social security funds, municipalities,
and general government Public Law Entities, such as hospitals, and own
revenues from all sources should be incorporated in the budget to avoid
41
transparency problems. The split between the ordinary and the investment
budget should be abolished and full cost commitments of public investment
programs should be published.
6. Distributed management: Line ministry autonomy and accountability should
be strengthened. As part of the increased transparency that a new program
budget will attain it is important that accountability and responsibility be
decentralized. The decentralization must be within the top down constraints
established in the medium term fiscal framework. The line ministries should be
given a strong mandate to manage within the new system and be held
accountable for the results. Each line Ministry should establish a central budget
office to coordinate budget and financial management functions of the ministry.
The primary responsibility for budget execution should be transferred to spending
units. The Ministry of Finance should provide agencies with clear guidance on
budget execution requirements and deadlines for budget reporting.
POST-CRISIS FISCAL RULES: STABILIZING PUBLIC FINANCE
WHILE RESPONDING TO ECONOMIC AFTERSHOCKS.
Fiscal rules have been among the most widely adopted budget innovations
during the past two decades. However, the fiscal crisis has revealed flaws
in many of the fiscal rules in place, which will force governments to adjust
on the basis of the lessons learned. The present article discusses the
optimum design choices for fiscal rules, key factors for their successful
implementation, measures to strengthen their enforcement mechanisms,
and expanding the scope and time-frame of fiscal rules to include tax
expenditures, contingent liabilities and other long-term fiscal risks.
1. Fiscal rules have been among the most widely-adopted budget innovations
during the past two decades. Many rules have been adopted by national
42
governments on their own initiative; others have been imposed by supranational
authorities such as the European Union or other regional bodies.
2. Fiscal rules are numerical targets that constrain key budget aggregates. The
constraints can apply to the deficit or the debt, to total revenues or expenditures
or to other aggregates. Enforcement can range from legal sanctions against
violation to reliance on information and transparency. The lack of a single
template for fiscal rules indicates that they are still undergoing conceptual as well
as trial-and-error development and that fiscal rules must be consonant with a
country’s political culture. Political factors are especially salient in determining the
means of enforcing constraints and the actions taken (or not taken) when
breaches occur.
3. The pervasiveness of fiscal rules derives from several sources and may be
influenced by a country’s development. Advanced European countries tend to be
concerned about elevated tax burdens and expenditure levels as well as the
pressure on public finance from their ageing populations. Some also are
sensitive to the sustainability of fiscal trends and believe that tougher budgetary
discipline will improve long-term prospects. Emerging countries in the Balkans
have been among the most enthusiastic rule adopters largely because they
believe that a strict fiscal framework will give investors and entrepreneurs
confidence in the government’s capacity to manage public finance. In fact, some
emerging countries have been rewarded with lower interest rates and longer
maturities on public debt. Finally, low-income countries have begun to embrace
rules, sometimes under pressure from international financial institutions,
sometimes because of self-realization that loose fiscal policies have impeded
development.
Main governance challenges
43
Government capacity is being tested like never before. Decision makers are
being confronted by a combination of policy challenges of unprecedented size
and complexity – from unemployment to climate change, ageing populations,
migration and other long-term concerns. Citizens are turning to governments,
seeking immediate solutions to complex problems and demanding high-quality
public services to meet their changing circumstances and needs.
Independent of recent extraordinary interventions, government plays a large role
in the economy as a spender, taxer and employer. Government expenditure
averaged 40% of gross domestic product (GDP) in Balkan member EU countries
and the government employed roughly 14% of the labour force. Government is a
major actor in modern society contributing to economic growth, delivering goods
and services, regulating the behaviour of businesses and individuals, and
redistributing income. It is imperative that governments work well.
Moreover, as they look to swiftly address the current financial and economic
outlook Balkan governments are re-thinking how to put in place a long-term
growth strategy that improves productivity and competitiveness. As the world
becomes more interconnected, governments need to be agile to respond quickly
in dynamic environments.
The pace of public sector reforms will undoubtedly have to accelerate in the
three main areas described below as governments respond to current financial,
economic, environmental and social challenges.
1. Fiscal consolidation and efficiency gains.
The current economic crisis has profoundly weakened the fiscal health of nearly
all countries. Many countries in the Balkan region are experiencing unsustainable
budget deficits, which have generated strong pressure to reduce public spending.
Most of these same countries are also facing other severe long-term challenges
44
– such as demographic change, global climate change and government
contingent liabilities – that also have the potential to threaten their fiscal
sustainability. While society’s expectations of government are increasing, the
resources available to meet these needs are becoming more limited. Under
these circumstances, rethinking the role of government and the scope of
activities, as well as improving public sector efficiency and effectiveness have
become more urgent.
Most countries have already implemented some budget reforms to introduce a
medium- and long-term perspective, and provide incentives to constrain
spending in the short-run. However, the effectiveness of these reforms varies,
and more action may be needed to strengthen fiscal discipline.
� All but five EU countries use fiscal rules of some kind (most often rules
concerning debt and balanced budget) as a means to constrain spending.
� Medium-term expenditure estimates are produced in every member country
except Greece, most often at an aggregate level.
Over the past 20 years, governments have implemented reforms in all areas of
public administration in order to increase efficiency; many of these reforms have
involved adopting market mechanisms and/or investing in communications
technology. As governments continue to seek efficiency gains in the current
environment of constrained resources, partnerships with the private sector to
produce and deliver goods and services may increase, as may the use of
information and communication technologies.
� Outsourcing is common in EU countries. On average, 45% of goods and
services used by government have been contracted out in OECD countries.
However this percentage has been relatively stable in the last 20 years.
45
� Governments are increasingly using private and non-profit entities to provide
goods and services directly to citizens. In 2009, in the Balkan States, 20% of all
government-financed goods and services were provided by private actors directly
to citizens compared to 6% in 1995.
�When compared to the high availability of e-government services citizens’ take-
up remains low even for leading countries, suggesting room to harness more
efficiency from e-service delivery. Between 10% and 60% of the citizens in EU
member countries used e-government services in 2008 compared to 55% to 90%
of businesses.
While efficiency gains are critical, they will not be sufficient in most countries.
Budget cuts to program may be inevitable. Governments will have to think
critically about what goods and services they should provide and how best to
provide them.
� Large differences in government employment across countries reflect policy
decisions on the scope and level of provision of public services as well as the
delivery method chosen (e.g. whether public services will be provided by
government employees or the private sector). However, government employment
is relatively constant, levels have remained stable over the past decade, and
most employees work in State and local government. Thus, central governments
may have little room for manoeuvre in terms of cutting payrolls.
� The average EU country spent close to 55% of total government expenditure
on social program in 2008 (including unemployment insurance, health care,
education and retirement program) compared to around 40% in 1995, indicating
the difficult choices facing policy makers when looking for savings.
2. Building strategic capacity to deal with complex problems.
46
Due to the complex nature of the current policy challenges, governments must
develop their capacities to think and act in the long-term, collaborate and co-
ordinate across levels and sectors of government, and to analyze and process
diverse information. This requires skilled and educated workforce, good quality
data and analysis, and incentives to take a medium- and long-term perspective.
Over the past 10 years many central Balkan governments have reformed their
human resource management (HRM) practices to delegate more decisions to
line Ministries, open recruitment to external candidates, introduce performance
assessments and performance-related pay, and cultivate a separate senior
management group.
The public sector will have to shape new rules for the private sector that balance
public responsibility and private interest. This will entail creating a more balanced
regulatory framework that prevents excesses and adequately manages risk,
while not inhibiting entrepreneurship and innovation. To accomplish this, it is
important that countries develop strong systems for regulatory management,
including the use of impact analysis, public consultation when developing new
rules and strategies to minimize burdens from existing rules. Some elements of
these systems are already in place, but governments may need to do more.
� Regulatory impact analysis (RIA) is a key policy tool that provides decision
makers with detailed information about the potential effects of regulatory
measures, including costs and benefits. Over the last decade, RIA systems have
become more comprehensive across nearly all countries. However, the depth of
these systems still differs.
� A large group of countries, new EU Members (Bulgaria, Romania, Slovakia,
Poland, etc.) were heavily engaged in administrative simplification strategies in
2009/2010. Among the most common strategies are the use of information and
47
communication technologies and electronic record and reporting requirements,
such as allowing businesses and citizens to file and pay taxes on line.
3. Maintaining transparency and accountability
Calls for government transparency and accountability have gained increased
support in the context of the public and private failures that contributed to the
financial crisis, as well as the scale of government intervention and spending that
the crisis has induced. Public procurement accounted for between 10% and 25%
of GDP in EU member countries before the crisis, and has been identified as the
government activity the most vulnerable to corruption.
Within government itself, transparency has greatly increased in importance over
the past decade. The number of governments (including in the Balkan region),
identifying transparency as a core value almost doubled between 2000 and 2010.
This increased focus on transparency is also reflected in reforms to budget
processes, legislation promoting access to information, the strengthening of the
integrity framework within government and the increased use of public
consultation.
�Today, the legal framework for open government is largely in place in EU
member countries. It consists of laws on access to information, privacy and data
protection, administrative procedures, ombudsman institutions and supreme
audit institutions.
� All EU member countries have a supreme audit institution to audit government
accounts. While all countries ultimately make the audited accounts available to
the public, there is considerable variation in the time it takes to do so. Fewer than
half of the EU member countries release the accounts within six months after the
fiscal year ends as is suggested by the EU Best Practices for Budget
Transparency.
48
�As of 2009, almost 90% of EU member countries provide some sort of
protection to whistle-blowers.
�There are many different mechanisms used by EU countries to engage the
public in the development of regulations, and the use of consultation has
increased in the past five years. While most EU member countries consult
informally with selected groups less than two-thirds publish public notices and
calls for comments.
CONCLUSIONS
One of the most notable features of European integration has been its creativity
and capacity to adapt to constantly changing challenges and needs. As the
Union embarks on a phase of “active” integration the practical need for
convergence between the Member States is making itself felt afresh. This calls
for closer harmonization of legislation or new forms of collective action on top of
the “passive” integration focused on eliminating internal barriers in the
Community that has long been the mainstay of its success.
Taking into consideration the experiences in the EU Member Balkan countries,
an administrative strategy needs to comply with at least five principles: it needs
to be innovative, multidisciplinary, communicative, assertive and outcome-
based. The proposals gathered below have been drawn observations carried out
in different countries. They are presented in a simplified manner and each of the
statements should be carefully examined and adapted for applicability in light of
the specificities of a given country.
49
The first set of elements can be defined as strategic and policy-oriented.
They refer to those actions that support the strategy from a tactical
perspective. They are relevant at all phases of the strategy but in particular
during the design phase, when policy makers need to make sure that they
will find support and they are setting the right objectives. They refer,
mainly, to the need to have in mind a broad concept of reform, to establish
clear objectives and feasible targets, to ensure political commitment, to
adopt a whole-of-government approach without a one-size- fits-all model,
and to promote a reform attitude inside the administration:
1) Establish a comprehensive program on administrative reform and
maintain broad policy priorities. Administrative reform should be
systematically adopted, avoiding an exclusive use of ad hoc measures.
Even if a strategy should be focused on a specific area at its inception,
such as processes of licensing reform to obtain relatively fast results, in
the long run a comprehensive program for administrative reform ensures
continuity, endurance of reforms and the creation of synergies. In the
Lisbon Strategy the European Commission has given much emphasis to
the reduction of regulatory burdens as a priority and member countries
have been asked to define a comprehensive strategy in pursuit of this
objective.
2) Take a whole-of-government approach. A whole-of-government
approach involves considering and including all parts of government in the
proposed strategy. This includes both horizontal (government agencies at
the same level) and multi-level governance perspectives (the relation
between national, sub- and supranational levels of government).
Institutional co-ordination and accountability are at the service of common
priorities and outcomes for better governance.
50
3) Ensure powerful (political) support. Political commitment in the form of
a strong declaration of interest needs to be followed by specific action. A
consistent legal framework in the form of a law or regulation is a way of
building a solid foundation for the strategy by describing its priorities,
allocating responsibilities in government and ensuring accountability of
results. To make sure the strategy goes beyond mere words on paper,
expected outcomes should be defined (a priori) and compared with their
realization (a posteriori).
4) Define clear objectives-targets and make institutions accountable for
them. In line with the legal frame and the definition of short and medium
term action plans, clear and measurable targets are needed to ensure that
reform ambition is met. This targeting is only useful, if there is institutional
accountability over time. In this policy area it is important to know where
the administrative burdens are and how substantial they are. Regulations
from some ministries are more burdensome than from others, and affect
end users differently. The simplification strategy needs to concentrate on
those regulations that create the greatest burdens, with goals that would
put pressure on the institutions responsible for lowering them.
5) Use success stories: start small and gain constituency. Benefits of
cutting red tape might be expressed in monetary terms. It is often said
that administrative reform saves money through the reduction of
regulatory burdens. But these savings are not collected and made directly
available to governments so that they can invest somewhere else. This
monetization of burden reductions rather expresses efficiency gains,
which should be the final objective of the reform strategy. As a result,
more resources are freed to undertake “normal” business, to the benefit of
those who must comply with regulation and the general public interest. To
start small means starting with reasonable ambitions that can be
realistically obtained within a concrete timeframe. Once successful stories
51
and numbers are available to show the benefits of cutting red tape,
building constituency for administrative simplification is less costly. A good
starting point could be to centre efforts on bureaucratic processes that are
either widely used or create much irritation, for instance the bureaucratic
processes related to health coverage and insurance.
6) Promote a reform attitude and innovative approaches. An innovative
approach should include the consideration of alternative approaches to
traditional administrative regulation, organizational issues and
management. An example to illustrate this is the use of ex post notification
procedures instead of ex ante approval mechanisms to obtain licences
and permits. This significantly reduces burdens to activities since they can
start before actually obtaining a licence. But it is only recommendable
when dealing with low risk activities and in cases where most applications
result in a licence being issued. A lack of innovation has often been
observed among civil servants participating in reforms in the Balkan
countries. It appears that financial incentives are not a definite solution
since these innovative shortcomings have been also observed in countries
where economic incentives are not a constraint. Reacting against this, the
Bulgarian Ministry of State Administration and Administrative Reform has
established an ambitious plan for Government Modernization Program
promoting incentives, implementing human resource development
program, promoting co-operation with the private sector when efficiency
gains can be obtained, and building a solid framework for the integration
of new technologies in public management.
Capacity building mainly refers to increasing abilities and skills of human
resources that will be dealing with specific issues as well as making
possible the development of intellectual debate inside the administration
on the best way possible to move forward the reform agenda. Facilitating
52
the dissemination of knowledge and increasing the awareness of why
administrative strategies are necessary, along with the way they can be
best implemented, are fundamental to success. Governments have to
ensure that staff can have access to information, technical support and
training and that these resources are well allocated so as to exploit their
potential.
1) Ensure a multidisciplinary approach to administrative simplification.
In many cases EU countries administrations are staffed by multidisciplinary
teams to undertake reform: economists, lawyers, philosophers, sociologists,
psychologists, political scientists, etc. Different backgrounds and approaches
help enrich administrative strategies and avoid an excessive dominance of
one of these fields of expertise. For instance, legal complexity is more difficult
to solve using overly legalistic approaches, thus lawyers need the support of
other specialists when drafting regulations and defining administrative
framework. How to define responsibilities and establish effective co-operation
between experts is an important challenge. A degree of specialization should
also exist to facilitate expertise development. This is especially relevant when
central services offer technical support to different government departments,
officials at the central services should be familiar with the concerned
department’s common challenges and jargon. For example, in Denmark the
Better Business Regulation Division of the Commerce and Companies
Agency designates officials to support the work of specific ministries so that
teams follow up the work of each ministry and respond to their inquiries. Such
an approach could support the improvement of skills and human capacities
for administrative reform in the Balkan states.
2) Training, training and training. Training is the main tool to improve skills
and human capacities. Training should target core teams for administrative
reform, public administration as a whole as well as the general public. Each of
the groups should be addressed accordingly through different training means
53
and adapted content. Whereas officials at the centre of government need
highly technical training, dissemination of knowledge to general public on how
administrative simplification affects citizens needs a more accessible and
simpler approach. Co-operation with academic, research and consulting
institutions could be timely so as to attract expertise and outsider
perspectives. This should not only be limited to a domestic sphere, as
international expertise, including that of other governments, can be essential
for capacity development
3) Reduce the digital divide. Ensuring the widespread use of new
technologies is necessary so as to maximize the benefits of using e-
government for administrative simplification. Internet penetration determines
the utility and reach of administrative procedures available on-line. Innovation
and adaptability of electronic devices can bring appropriate solutions.
Institutional design. Institutions matter in regulatory governance since they
are fundamental in designing and implementing any strategy. Institutions
are needed to establish rules to increase transparency, to foster co-
ordination inside the administration, to ease communication with
stakeholders and to promote a cultural change in the way the
administration approaches administrative simplification. The right
institutional design, however, needs to take into account political, cultural
and social specificities. Administrative strategies require institutional
support in order to guarantee the quality of the strategy, to stimulate
champions for reform and to find a right balance between centralization
and ownership of reform.
1) Find a balance between centralization and reform efforts ownership.
There is a trade-off between centralized control over reform and complete
involvement at lower levels of government. If co-ordination mechanisms are
too loose, a comprehensive strategy might encounter problems in being
54
coherently implemented. On the contrary: if centralization is too tight,
institutions applying the strategy might lose the feeling of ownership and thus
the strategy might encounter implementation barriers. The right balance
needs to be achieved to keep strategies moving forward, taking into account
the institutional system, the size of the public administration, and the needed
degree of ownership. A central unit for administrative reform can become a
useful tool to understand this balance and provide effective co-ordination in
practice. This balance can be more easily found in the case of small
countries, such as Bulgaria and Croatia, than in larger countries or
administrations with decentralization tensions.
2) Promote transparency through communication. Communicating a
strategy’s objectives and elements, its relation with other reform programme,
and its progress over time contribute to enhancing transparency. It also helps
ensure that there is a match between achievement and objectives
contributing to accountability. If work on administrative reform goes unnoticed,
it is highly probable that support will diminish. Moreover, sound
communication contributes to cultural change and to building a sense of
ownership. There are different tools for communication which adapt to
different audiences and messages to convey. Standards, guidelines and
manuals for communication designed for the general public can support
better communication initiatives. Examples of this can be found in Italy, Spain
and the United Kingdom where principles for effective communication have
been established. This facilitates the general understanding of administrative
reform and could diminish the resistance to change.
3) Encourage public consultation and participation in policy making.
Consultation and participation support the definition of priorities for a strategy.
Consultation processes can enhance a government capacity to identify irritating
areas of regulation. For instance, in the United Kingdom the Better Regulation
Website collects ideas from citizens, which are processed transparently and
55
reported on if ideas were taken forward or rejected. Consultation can be
encouraged through different channels such as launching satisfaction surveys,
establishing advisory bodies with particular roles to give voice to stakeholders
and creating ad hoc task-forces that can make recommendations on very specific
issues. These bodies are often able to channel priorities and to promote efforts
for improving the administrative culture. They open the possibility for different
parties to exchange views that are good source of data collection for the
administrations and encourage the participation of other entities in the policy-
making process.
Develop indicators on government performance: benchmarking and
awarding. Measuring and evaluating government performance is needed to
ensure accountability of public institutions. In addition, benchmarking can
encourage competition and promote co-operation between institutions, thus
facilitating progress. Performance can be further enhanced through mechanisms
to reward effective efforts. Rewarding can also take place at a more micro level
by encouraging citizens to point out relevant administrative burdens and
procedures that are too cumbersome and in need of revision. “The Best Idea for
Red Tape Reduction Award” is an example of how authorities promote and
reward good and innovative ideas from citizens to reduce unnecessary
bureaucracy stemming from legislation. The criteria of this award take into
consideration:
a) originality and degree of innovation of the proposal,
b) feasibility (i.e. potential for simple and quick implementation),
c) reduction potential (i.e. how much businesses could save; sometimes
relatively small burdens can be more irritating than more costly ones - this is also
taken into account) and
d) transferability of possible solutions to other areas/other cases.
This award organized in 2009 by the General Directorate for Enterprise and
Industry of the European Commission complements the “Red Tape Reduction
Award” conceived to award only public authorities.
56
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