ZAGREB, 12 June, 2021 - As many as 72% of cities and 76% of municipalities in Croatia have fewer residents than is optimal considering their economic potential and volume of services, the Večernji List daily issue of Saturday says.

This conclusion is the result of a study made by Croatian National Bank (HNB) researchers Antonija Biljan, Milan Deskar Škrbić and HNB deputy governor Sandra Švaljek, focusing on the optimal size of local government units, which is a rare research topic in Croatia.

Zagreb was not included in the analysis due to a number of particularities, and the analysis shows that cities should not have fewer than 15,000 residents (15,139) while the optimal number of residents for a municipality is 3,744. Only one in four cities or municipalities meet that criterion.

The study was published after the recent local election and its authors put forward several recommendations for politicians, suggesting voluntary merging of the smallest local government units or interest-based cooperation between neighbouring municipalities.

There are 556 local government units in Croatia, of which 127 are cities and 428 municipalities. The City of Zagreb has a special status of city and county.

Only 35 cities have more residents than the optimal number, as do 102 municipalities. The budgets of all local government units amount to around HRK 28 billion.

The country's existing territorial organisation is not based on a historical administrative division but is a result of discretionary decisions by policy makers in the early 1990s, the authors of the study say.

Considering the size of territory, population, fiscal capacity, system of financing and functions of local government units, many domestic experts warn that the current territorial structure is inefficient and calls for their merger.

The HNB study focused on population density, demographic structure of local residents, socioeconomic factors such as the amount of taxable income and unemployment rate, as well as transfers from the central government, the daily says.

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As Novac/Marina Klepo writes on the 9th of August, 2020, in its new term, the Croatian Government has promised to dramatically cut red tape by abolishing the functions of deputy mayors, mayors and prefects, as well as abolishing Croatian municipalities that prove to be inactive.

Bearing in mind that there are 428 Croatian municipalities, 128 cities and 21 counties, about 650 deputies would be left without a job, and Croatian Government estimates say that this would save "at least 100 million kuna" per year. However, these announcements of local self-government reform are considered by many to be insufficiently ambitious, given the fact that the total number of employees in local self-government bodies stands at around 14 thousand.

Using artificial intelligence, Nikola Strahija, a member of the Glas Poduzetnika (Voice of the Entrepreneurs) Association, came to the conclusion that the abolition of financially unsustainable local self-government units would save at least one billion kuna a year. Some of them, he says, "don't even have the basic things that residents need every day, and yet they have their own municipality and their own mayor."

He added that Croatia has more than a hundred units that cannot function without being in receipt of state aid, and by merging them, enormous savings can be made. Economist Goran Šaravanja, however, recently published a text stating that the focus should not be mechanical cost cutting, but the main goal should instead be to make local governments more functional, which means assigning them clear tasks and expecting them to use money more rationally.

When it comes to the number of local units, the experience of EU countries shows that each of them have their own historical and geographical specifics. There are the fewest such units in Denmark, with only 98 municipalities and five regions, and in most other countries, in relation to the number of inhabitants, their number is much higher, especially in countries that have mountainous areas such as Croatia. Although mostly flat, like Denmark, Šaravanja states that Hungary, for example, has 3,177 municipalities, 23 major cities, plus Budapest and 19 regions, while Slovenia has 212 municipalities, and their number has increased by 300 percent since the declaration of Slovenian independence.

If the administration in Croatia is to be improved, and improved it absolutely must be, it isn't enough to simply reduce the number of Croatian municipalities and all of the ins and outs that go with it, because local services must also be provided in more remote places. Therefore, a mere reduction in the number of local units doesn't necessarily mean a reduction in administrative staff, nor does it automatically imply greater efficiency.

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