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THE LEGAL INDEBTEDNESS CAPACITY OF ROMANIAN LOCAL GOVERNMENTS - THEORETICAL AND EMPIRICAL EVIDENCES

Irina Bilan and Oprea Florin ()
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Oprea Florin: Universitatea "Al. I. Cuza" Iasi, Facultatea de Economie si Administrarea Afacerilor

Annals of Faculty of Economics, 2011, vol. 1, issue 2, 316-322

Abstract: The factual, not only formal capacity of local governments to appeal to borrowed resources is, considering the current conditions, a prerequisite for ensuring economic and social development of local communities. In this paper we intend to position the main theoretical and empirical evidences on local governments' indebtedness capacity, mainly focusing on its sizing according to Romanian regulatory framework. With respect to previous research, the issue approached is one of great interest as it has not been, in the Romanian literature on local public finances, subject to a separate analysis of proportions. The undertaken analysis comprises a quantitative dimension, based on processed data from the consolidated general budget of Romanian local governments for 2007-2009, in permanent conjunction with monitoring and analysis of the involved qualitative aspects. To ensure the relevance of the research results, the analysis undertaken refers to the legal framework in function throughout the considered period of time, without involving the legislative changes operated in mid-2010. The main conclusions drawn from our analysis indicate that, considering the current Romanian socio-economic environment, under the impact of specific factors of different nature, the legal indebtedness capacity is far from being well valued, thus bringing its benefits to local communities development. This conclusion is valid from a global perspective as well as for different types of local communities. This appears to be inconsistent with the permanently claimed need to fund important local public investments, mainly in infrastructure, indicating, despite the high legal indebtedness capacity, the lack of factual access to borrowed resources. We suggest, therefore, to introduce the concept of effective indebtedness capacity, the result of a particularized correlation for different local governments between legal indebtedness capacity and the manifestation of several factors with specific action and we intend to contribute, by future research, to its measurement.

Keywords: legal indebtedness capacity; effective indebtedness capacity; local governments; local public debt; local autonomy (search for similar items in EconPapers)
JEL-codes: H74 (search for similar items in EconPapers)
Date: 2011
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