Global crisis, local impact: a comparative approach to the financial crisis' impacts on European local levels

The financial crisis did have tremendous effects on public sectors worldwide. While there is plenty of research on reactions at the state level and by single local governments, research on the particular impacts at local levels are scarce. This article evolves a framework of "direct" and "indirect" impacts covering 21 European countries. In referring to "direct" fiscal impacts, all local levels generated budget deficits in 2008/2009, and most faced significant increases in debt. The second category of so-called "indirect" impacts contains a qualitative assessment of structural changes made to the institutional frameworks at local levels, initiated by the states. Such measures affected grants, local structures or the allocation of functions between local levels and states. The most common "indirect" impact is the strengthening of fiscal regulation, which can be clearly traced back to the financial crisis and shows some effect of supranational EU legislation. This article exposes a great variance of fiscal trends and state measures as consequence of the financial crisis. Finally, consequences within institutional frameworks are more dramatic and lasting than fiscal ones. The financial crisis deeply affected state and local relationships through centralization.