Effects of the crisis in Spanish municipalities' financial condition: an empirical evidence (2005-2008)

Abstract

Administrative decentralisation in Spain has been a continuous process since the restoration of democracy. However, while significant transfers of powers and funding have taken place between the central and regional governments, this is not the case with respect to local authorities. This situation, coupled with borrowing constraints and the budgetary balance required of Spanish councils under Spanish law, as well as the present economic crisis, is causing financial difficulties in municipal accounts. In this paper, we examine a sample of 2,364 local authorities, stratified by population size, for the period 2005-2008, with the aim of analysing the finances of Spanish local councils and observing the effects of the crisis on their financial condition.