Mihály Kopányi - Hungary: modernizing the subnational government system

Hungary has been a pioneer in local government reform among transition economies. Through a series of legal reforms introduced since 1990, Hungary has decentralized the state administration and re-established the full autonomy of local governments. The local governments have adjusted resolutely to the changing circumstances, but are reaching the limit of their ability to adapt in the current framework. To help Hungary continue to be successful in its transition and to aid its EU accession, the Bank partnered three units within the Europe and Central Asia region. Those sectors included the Poverty Reduction and Economic Management Sector Unit, the Infrastructure Sector Unit, and the Private and Financial Sectors Development Sector Unit. This paper discusses key findings of this partnership study, called the Hungary Subnational Development Program. This publication also proposes policies for modernizing Hungarys subnational government system from the perspective of fiscal decentralization, local capacity building, and development of a competitive credit market. This publication will be of interest to policymakers at the national and local level in Hungary and throughout Eastern Europe.