PORTUGAL

According to the constitution ratified in 1976 and amended in 1982 and 1989, Portugal is a republic ruled by a semi-presidential system. Its legislative power is composed of a unicameral Parliament (Assembleia da República) whose members are elected for a four-year term. The government is led by the prime minister and the head of state is the President of the Republic who is elected for a five-year term. Local democracy was established in the mid-1970s and has been developing ever since.

The 1976 Constitution recognises the principle of local government and decentralisation. In 1976, the islands of Azores and Madeira were granted special status as autonomous regions (Regiões Autónomas). In 1999, several laws were adopted to enhance the responsibilities of the municipalities and parishes, which are subdivisions of municipalities. An attempt was made to create eight self-governing regions in 1998, submitted to a national referendum. Although the referendum was invalidated by the low participation rate (below 50%), a majority (61%) of voters voted “no”.

In 2007, a reform of the Local Finance Act (Law 2/2007) changed the grant system, creating the Municipal Social Fund (FSM). It also gave municipalities a share of the personal income tax. In 2013, a new Local Government Reform (Law 73/2013) redefined municipal responsibilities. Revised regional and local finance laws (effective in 2014) were enacted with the goal of strengthening fiscal sustainability and increasing transparency and accountability. The reform also reduced the number of parishes from 4 259 to 3 091. Finally, a new reform was launched in 2021 (Law 39/2021 on the creation, modification and extinction of parishes) that enables to reverse the process of aggregation of parishes.

Since 2019, a new decentralisation programme is to be implemented gradually over three years, resulting from Law 50/2018 (framework law on decentralisation of competences to municipalities and inter-municipal communities) and Law 51/2018, which revised the Local Finance Law. The Law 50/2018 is only applicable to the municipalities of the mainland; the transfer of responsibilities and powers to local governments of the Autonomous Regions is regulated by a specific law, enacted by the respective legislative assemblies. The reform aims to transfer new responsibilities to municipalities in a wide range of domains, in particular education, healthcare, justice, culture, social services and transport. The intention of the reform is to increase the share of resources spent at the local level, to improve the efficiency and effectiveness of service delivery to the population, and to increase inter-municipal cooperation, including at the metropolitan level. The reform has progressed slower than was intended as the transfer of competences to municipalities was to be finished by January 2021. The deadline has been extended until the end of March 2022 for education, and until the end of December 2022 for social services. The transfer of responsibilities in the health sector has been considered as achieved in March 31, 2022, although the exercise of the competence by the municipalities will only materialise starting from the date of signature of the transfer notice, under the terms provided for therein.

In addition, Decree-law 57/2019 allows, following the principle of subsidiarity and by reciprocal adhesion, the possibility to transfer competences and financial resources from the municipality to the parish in the following areas: management and maintenance of green spaces, cleaning of public spaces and maintenance of urban amenities, fairs and markets, maintenance of schools, among others. This transfer is being carried out with regular updates.

Another reform discussion is on-going concerning the creation of administrative regions in mainland Portugal, whose existence is provided for by the 1976 Constitution, but which were never established. Regarding the regionalisation reform, the political decision has no fixed schedule.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
308 municipalities (município)		2 autonomous regions (regiões autónomas)
Average municipal size: 33 436 inhabitants
308		2	310

[1] Name and number of sub-municipal entities: 3 091 parishes (freguesias)

OVERALL DESCRIPTION: According to the constitution, Portugal has a three-tier system of local government, consisting of regions, municipalities and parishes. In practice, however, a regional level was not implemented in mainland Portugal, so the subnational government level consists of two overseas autonomous regions, 308 municipalities (municípios) and 3 091 parishes (freguesias) at the sub-municipal level. There are 278 municipalities and 2 882 parishes in mainland Portugal while there are 19 municipalities and 155 parishes in Azores, and 11 municipalities and 54 parishes in Madeira.

Portugal is also divided into five mainland regions and 18 districts, both for administrative purposes. The districts are deconcentrated central government units and serve as the basis for few subdivisions, namely as electoral constituencies. The practical role of districts has decreased over time but abolishing them altogether would require a constitutional amendment. In the five mainland regions, Commissions for Regional Coordination and Development (CCDR) have been established to coordinate the different sectoral interventions of the central government in each region and manage regionalised EU funds.

REGIONAL LEVEL: Azores and Madeira have specific status and legislative power. They are also recognised as outermost regions at the European Union level. The Azores archipelago is located in the North Atlantic, 1 500 km from the European mainland. The archipelago comprises nine islands and several islets, São Miguel being the largest and most populated one (56% of population), followed by Terceira. The archipelago of Madeira is located 520 km from the African coast and 1 000 km from the European mainland. It is composed of four main islands (Madeira, Porto Santo, Desertas Islands and Savage Islands, the last two islands being uninhabited). The legislative assembly (Assembleia Legislativa) is composed of members elected by direct universal suffrage for four years. The president (Presidente do Governo Regional) co-presides over the regional government for the same period.

MUNICIPAL LEVEL: All 308 municipalities have the same status in terms of responsibilities and powers. The deliberative body is the municipal assembly (Assembleia Municipal), which is composed of members elected by direct universal suffrage for a four-year term but also of the presidents of the parishes located within each municipality's jurisdiction. The executive branch is the executive council (Câmara Municipal), which is composed of members elected by direct universal suffrage for a four-year period. Both elections used the Hondt Method. The mayor (Presidente da Câmara Municipal) is elected for a four-year mandate and is selected as head of the list.

Municipalities are large by international comparison, amounting to 33 436 inhabitants on average (vs 10 331 inhabitants in the OECD and 5 172 inhabitants in the EU27 on average). Around 16% of municipalities have fewer than 5 000 inhabitants (vs 1% in the OECD). In Portugal, 65% of the population lives in cities of more than 50 000 inhabitants.

At the sub-municipal level, parishes have an executive body (Junta de Freguesia) and a deliberative body (Assembleia de Freguesia, "parish assembly"), whose members are elected every four years. The presidents of the parish boards are also members of the municipal assembly.

HORIZONTAL COOPERATION: Inter-municipal cooperation has been encouraged through the laws 10 and 11 of 2003 that create inter-municipal com- munities (comunidades intermunicipais), which can have specific or general purposes. In 2008, a reform of the inter-municipal cooperation (Law 45/2008) was approved in order to redesign the territorial scope of inter-municipal communities. Through Law 75 of 2013, 21 compulsory inter-municipal communities were created in mainland Portugal. Currently, all municipalities are engaged in one of the inter-municipal cooperative associations in Portugal. In order to develop multi-level contracts, a Partnership Agreement signed between Portugal and the European Commission is used to promote inter-municipal cooperation at the level of the new inter-municipal communities.

In addition, the two metropolitan areas of Portugal, Area Metropolitana de Lisboa (AML) and Area Metropolitana do Porto (AMP) are covered by metropolitan area governance bodies. They were first established in 1991, through a national law, but without a definition of their competences and resources. These two metropolitan bodies were further strengthened through two laws in 2003 and 2008, and more recently by Law 75/2013. Metropolitan areas, although they are not local authorities, manage their own services and aim to coordinate investments as well as some municipal services of a supra- municipal nature. The government is currently contemplating improving their metropolitan governance. Today, AML encompasses 18 municipalities, i.e. 2.87 million inhabitants (with the municipality of Lisbon having 509 614 inhabitants) while AMP comprises 17 municipalities, i.e. 1.7 million inhabitants.

The responsibilities of the two autonomous regions are extensive, covering health and social welfare, education, roads and transport, economic development, environment, culture, regional planning, water, tourism, etc. They are also responsible for municipal affairs in their jurisdiction (organisation, financing and supervision). At the municipal level, the competences are established by laws 159/99 and 169/99 modified in 2002, 2007 and 2013, and Law 69/2015 which expanded the local authorities’ competences in education, teaching and vocational training. Parishes carry out some areas of responsibility such as green areas maintenance, road cleaning, fair and markets and issuing of pet licenses. Recently, law 50/2018 defined the framework for the transfers of new responsibilities to local authorities.

Since 2019, the new decentralisation programme has been gradually implemented over three years until today, aiming to transfer new responsibilities to municipalities in a wide range of domains, in particular education, health, justice, culture, social services and housing, roads and public transport. It also transfers responsibilities to inter-municipal communities and parishes. The transfer of competences started in 2019 for the local authorities that did not declare that they were unwilling to implement them, and it is still ongoing. The municipal finance law (No. 51/2018) was also revised to strengthen municipal finances.

The specific financial conditions of these transfers are currently being clarified. They would include a consolidated transfer package aggregated through the Decentralization Financing Fund (FFD). The FFD is an allocation provided in the State Budget that aims to finance the new planned transfers to municipalities.

Municipalities can delegate tasks to inter-municipal entities and parishes and can also sign contractual arrangements with the central government to exercise shared responsibilities. As a result, there is, in practice, a relatively complex network of functions. In addition, in Portugal, most local governments use, as regulated by law 50/2012, local enterprises and “municipalised” services (serviços municipalizados). Municipalised services are entities with a special statute, created with the aim of increasing flexibility in the provision of public services. The number of municipal enterprises dramatically decreased after the 2008 crisis, from 337 in 2011 to 192 in 2017, and 184 in 2020.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Organisation of regional administration and related services; Municipal affairs	Internal administration
2. Public order and safety		Civil protection (municipalities and parishes)
3. Economic affairs / transports	Agricultural and fisheries development; Commercial and industrial development; Tourism; Transport including roads, traffic and land transport and maritime and air transport between the islands	Local roads; Parks; Local ports (2021); Urban and public transports; School transport; Local tourism; Consumer protection;Local development; External cooperation
4. Environment protection	Environment; Nature protection; Water, mineral and thermal resources and locally produced energy	Drainage and sanitation; Waste management; Forest fire fighting; Beaches; Animal health and protection (2021).
5. Housing and community amenities	Planning, accommodation; Urbanism and regional planning	Rural and urban infrastructure (municipalities and parishes); Energy;Communications; Home care for the elderly: Land useand urban planning (municipalities and parishes); Water supply
6. Health	Public health	Healthcare (construction and maintenance of primary health care centres) in 2021
7. Culture & Recreation	Heritage and cultural creation; Folklore and crafts; Sports	Heritage; Culture and science; Leisure and sport (municipalities and parishes)
8. Education	Primary and secondary education	Education, all except tertiary education
9. Social Welfare	Quality of life	Municipal social programmes (municipalities and parishes)

Scope of fiscal data: at regional level, regional governments of the Azores and Madeira, regional autonomous Services and Funds (health, education), regional hospitals, regional public corporations; at local level, municipalities, parishes, local autonomous services, local public enterprises, inter-municipal communities and associations.

SNA 2008

Availability of fiscal data: High

Quality/reliability of fiscal data: High

GENERAL INTRODUCTION: Fiscal provisions are set out in Art. 238 of the Portuguese Constitution. Several fiscal reforms have taken place over the last 15 years. The reform of the LFL in 2007 created the Municipal Social Fund (FSM), an earmarked grant to finance specific expenditures in education, health and social policy, as well as giving municipalities a participation of up to 5% of the personal income tax from their residents. The 2007 law also aimed at simplifying the intergovernmental system of transfers, introduced horizontal equalisation, tightened municipal fiscal rules and reformed the municipal accounting system.

The new RFL and the LFL, adopted in 2013 and effective since 2014, were enacted with the goal of strengthening fiscal sustainability and increasing transparency and accountability. The amendments to the LFL introduced in 2018 (Law 51/2018) have contributed to an even greater strengthening of fiscal sustainability, transparency and accountability, through the allocation to municipalities of 7.5% of the VAT raised on accommodation, catering, communications, electricity, water and gas sector.

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	2 289	6.7%	13.6%	100.0%
Inc. current expenditure	1815	5.3%	11.8%	79.3%
Compensation of employees	765	2.2%	18.8%	33.4%
Intermediate consumption	580	1.7%	30.1%	25.3%
Social expenditure	277	0.8%	4.0%	12.1%
Subsidies and current transfers	168	0.5%	11.5%	7.4%
Financial charges	24	0.1%	2.4%	1.0%
Others	1	0.0%	35.1%	0.0%
Incl. capital expenditure	474	1.4%	31.8%	20.7%
Capital transfers	84	0.3%	11.9%	3.7%
Direct investment (or GFCF)	390	1.1%	50.0%	17.0%

EXPENDITURE: Despite the decentralisation process, which began in 2011 and continued with the 2013 local government reform, and the transfer of competences to municipalities since 2019, Portugal is still a centralised country in terms of subnational government spending responsibilities. The level of subnational government spending in GDP and public spending remains below the OECD average for unitary countries (12.7% of GDP and 27.5% of public spending in 2020) and below the EU27 average (18.3% of GDP and 34.3% of public expenditure). The subnational governments’ role as public employers is also limited relative to the OECD (accounting for 18.8% of total public staff expenditure, versus 41.1% on average in OECD unitary countries), even though staff spending accounts for one-third of subnational government expenditure.

DIRECT INVESTMENT: Subnational governments are responsible for half of total public investment, in line with the OECD average for unitary countries. However, subnational government investment accounted for only 1.1% of GDP, which is below the OECD average for unitary countries (1.9% in 2020).

Some public-private partnerships are carried out at regional and municipal levels, mainly for municipal water distribution, light rail, sewerage and waste management and car parking. The Autonomous Regions of Madeira and Azores have also launched their own PPPs, such as road projects in Madeira and a road and hospital project, both in Azores. While a PPP Unit has been formed at the central government level within the Ministry of Finance (the Unidade Técnica de Acompanhamento de Projetos - UTAP), which accompanies the central government, deconcentrated central government entities and public enterprises, the unit is not formally mandated to act in relation to PPPs undertaken by subnational governments.

Subnational government expenditure by functional classification
2019	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure by economic function	2 112	5.7%	-	100.0%
1. General public services	598	1.6%	12.4%	28.3%
2. Defence	0	0.0%	0.0%	0.0%
3. Security and public order	45	0.1%	7.2%	2.1%
4. Economic affairs/transports	332	0.9%	24.8%	15.7%
5. Environmental protection	156	0.4%	71.6%	7.4%
6. Housing and community amenities	160	0.4%	96.0%	7.6%
7. Health	136	0.4%	5.6%	6.5%
8. Recreation, culture and religion	192	0.5%	58.8%	9.1%
9. Education	262	0.7%	16.2%	12.4%
10. Social protection	231	0.6%	3.7%	10.9%

General public services is the main spending area (28.3% of subnational government spending) for Portuguese subnational governments, followed by economic affairs/transports, which comprise 15.7% of subnational government spending. Next subnational spending area are education (12.4%) and social protection (10.9%). On the other hand, subnational governments are responsible for most of public expenditure in housing and community amenities and, to a lesser extent, in recreation, culture and religion.

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	2 250	6.6%	15.2%	100%
Tax revenue	869	2.6%	10.3%	38.6%
Grants and subsidies	834	2.5%	-	37.1%
Tariffs and fees	364	1.1%	-	16.2%
Income from assets	64	0.2%	-	2.8%
Other revenues	119	0.4%	-	5.3%

OVERALL DESCRIPTION: Although belonging to the group of OECD centralised countries where subnational governments have relatively few spending responsibilities and few resources, Portugal stands out due to the importance of tax revenues, which account for the majority of subnational government revenue, above the OECD average for unitary countries (35.4% in 2020). Nevertheless, the share of inter-governmental transfers has increased in recent years, and they are nearly as important of a revenue source as tax revenue, representing 37.1% of total subnational government revenue in 2020.

TAX REVENUE: Tax revenue is an important revenue source for regions and municipalities, accounting for 38.6% of their revenue in 2020. However, the income derived from subnational government tax revenue is limited, representing 2.6% of GDP and 10.3% of public tax revenue, compared to 4.5% of GDP and 18.7% of public tax revenue in OECD unitary countries on average in 2020.

The two autonomous regions have a certain degree of tax autonomy as they are able to retain nearly all national tax revenue generated within their territories and adjust their rates (including PIT, CIT, VAT and excise taxes). They can also create new taxes. They have strong control over rates and base, which has been reduced - however - by the 2013 RFL, in particular over tax exonerations.

The main source of municipal own revenues comes from the Municipal Property Tax (Imposto Municipal sobre Imóveis - IMI). The IMI is levied annually by municipalities, on the Patrimonial Taxable Value (VPT) of buildings and lands, urban and rural. Municipalities can set the tax rates annually, within a defined range from 0.3% and 0.45% for buildings, and 0.8% for lands. The importance of the IMI has been increasing and, in 2020, it represented 45% of municipal tax revenue. The IMI’s growth since 2015 can be explained by the real estate tax reform implemented to increase local governments’ revenues (following the recommendations of the Economic and Financial Assistance Programme).

Other municipal taxes include the Municipal Property Purchase Tax (Imposto Municipal sobre Transmissões Onerosas de Imóveis - IMT), the Circulation Unique Tax (Imposto Único de Circulação – IUC) and the Municipal Surcharge (Derrama). The tax on property transactions (IMT) represented about 31% of municipal tax revenue in 2020. Revenues collected from the Circulation Unique Tax (IUC) are shared between the central and local governments, forming 9% of municipal tax revenue. The IUC is a yearly tax that is calculated considering the engine cubic capacity (displacement) and the CO2 emissions. Finally, the municipal surtax on the corporate profit tax (derrama) formed about 7% of municipal tax revenue.

GRANTS AND SUBSIDIES: The largest amount of intergovernmental transfers to municipalities comes from the Financial Equilibrium Fund, a general-purpose grant that corresponds to 19.5% of the average of the amount collected with PIT, CIT and VAT. This fund is then divided into two sub-funds with different purposes and subsequently redistributed among municipalities with different criteria: (i) the Municipal General Fund, aimed to finance their legal assignments; (ii) the Municipal Cohesion Fund – with the objective of correcting asymmetries among municipalities, particularly with respect to fiscal capacity and unbalance of opportunities.

Municipalities are also entitled to a conditional transfer from the national budget – the Municipal Social Fund – designed to adjust to the transfer of additional assignments, mainly related to social functions such as health, education and social assistance.

The 2022 State Budget provides for a Decentralization Financing Fund (FFD), an allocation provided in the State Budget that aims to finance the new planned transfers to municipalities. Transfers from the FFD are expected to amount up to EUR 843.3 million from April to December 2022 to finance the new assignments allocated to municipalities, namely in the areas of education (EUR 729.6 million), health (EUR 70.5 million), social services (EUR 42.3 million) and culture (EUR 0.9 million).

The autonomous Regions of Azores and Madeira receive several types of transfers from the central government, including a lump-sum subsidy, a regional cohesion fund, national co-funding with EU funding and a fund to finance common interest projects.

OTHER REVENUE: Service charges and fees (water, sewerage, waste collection and public transport) accounted for 16.2% of total subnational government revenue, which is significantly higher than the OECD average for unitary countries (9.1% in 2020). Property income (rents, sales of assets) accounted for 3% of subnational government revenue in 2020.

Subnational government fiscal rules and debt
2020	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt (consolidated)	2 108	6.2%	3.9%	100%	-
Financial debt	1 830	5.4%	3.6%	86.8%	100.0%
Currency and deposits	0	-	-	0.0%	0.0%
Bonds / debt securities	695	-	-	33.0%	38.0%
Loans	1135	-	-	53.8%	62.0%
Insurance pensions	0	-	-	0.0%	-
Other accounts payable	278	-	-	13.2%	-

FISCAL RULES: The LFL and RFL introduced a multi-annual budgetary framework and tighter budget balance rules, including arrears, off-balance sheet liabilities and expenditure ceilings. Fiscal coordination mechanisms between the central and subnational governments have been improved with the creation of the Public Finance Council whose mandate covers all levels of government.

DEBT: The LFL and RFL laws strengthened borrowing rules for subnational governments. The RFL law stipulates that the autonomous regions’ liabilities should not exceed one- and-a-half times their three-year average of net current revenue. The LFL introduced similar requirements for each municipality individually. Municipal individual borrowing is limited at 150% of the average municipal total net current revenue of the previous three years. Municipalities that exceed this debt ratio threshold must reduce the excess by a minimum of 10% a year until they reach the threshold. In addition, as the debt of municipalised services and local public enterprises had been increasing, it was decided to change the definition of debt, which was extended to include local governments themselves, municipalised and inter-municipalised services, inter-municipal entities, municipal associations, local enterprises, enterprises owned partly by municipalities, etc. Failure to comply with the limit leads to the imposition of a financial restructuring plan. If the debt ratio is above 300%, the municipality is obliged to follow the so-called municipal adjustment plan, which includes financial assistance to distressed municipalities from the Municipality Resolution Fund (FAM).

Overall, in 2020, subnational government debt was lower than the OECD average of unitary countries (14.5% of GDP and 10.5% of public debt). It is made up of financial debt or “Maastricht debt” (86.8%) and, to a lesser extent, other accounts payable (13.2%). The financial debt comprises both loans (62% of debt stock) and bonds (38%).

TERRITORIAL MANAGEMENT OF THE CRISIS: In mainland Portugal, the national health system is centralized. The Minister of Health leads the response to the pandemic. Nevertheless, local authorities have some devolved powers on primary health care, as well as powers on civil protection, such as closing public areas. During the crisis, the social safety net against the economic hardship was also partly secured by local authorities. Portugal declared a state of emergency on 18 March 2020, based on Art. 19 of Portugal’s Constitution, which allows Portuguese authorities to partially curtail several fundamental rights.

In the autonomous islands of Madeira and Azores, the self-governing administration has considerable legislative, executive, and international powers. The health and civil protection matters have been devolved to the self-governing autonomous authorities, within the powers defined by the Framework Law of Civil Protection, the Framework Health Law, and the Law on Public Vigilance of Health Risks. During the pandemic, Madeira and Azores reacted stronger than the continental Portugal. For instance, in Madeira, the use of protective masks in all public spaces (indoors and outdoors) was imposed in July 2020. This means that the regulatory framework response to the pandemic in the autonomous regions was somewhat differentiated from continental Portugal.

Since most resources for health in Portugal are concentrated in Lisbon and Porto, and the younger populations are more concentrated in coastal regions, the impact of COVID-19 on health services has been territorially differentiated, making coordination more difficult. As the residents of remote areas with lower socio-economic indicators have poorer access to health services, there have been territorial differences in the response to crisis.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: Municipalities implemented a wide range of actions to support citizens and businesses. Municipalities often reinforced their emergency funds or created new funds to mitigate COVID-19 effects. In addition, tax exemptions and reductions were used. With their own resources and support received from the central government, local entities provided financial support directly to companies, families and social institutions.

A series of measures have also been taken to support subnational governments. For instance, municipal expenditures on equipment, goods and services between March and June 2020 could be financed by the Municipal Social Fund. Balanced budget and spending rules were also relaxed. Furthermore, the short-term loan authorisation was simplified and medium to long-term borrowing was facilitated. For short-term loans, municipalities and parishes could borrow without authorisation from their legislative body if the expenses were for pandemic-related urgent needs. The 2-year maximum term for loan capital was suspended until December 2020. In addition, local authorities were able to request advance or early transfers of national taxes.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: At the subnational government level, the drop in tax revenue (-8%) induced by the pandemic in 2020 was offset by an increase in grants (+9%) and social contributions. Subnational government revenue from CIT dropped by 16%, those from excise taxes from 12%, and those from the property tax by 6%. On the other hand, subnational revenue from the PIT increased by 6%. Subnational governments were impacted differently based on their demographics and economic structures. Taking the example of Lisbon, the municipality experienced a revenue drop of EUR 273 million in 2020, of which EUR 115 million was related to the drop of property transfer tax and EUR 20 million to the decrease in tourist tax.

On the expenditure side, subnational expenditure increased by 7% between 2019 and 2020 (in real terms), driven by an increase in direct investment (+26%) and subsidies and current transfers (+9%). In the case of Lisbon, the municipality approved a Social Emergency Fund of EUR 25 million in April 2020 to combat the crisis. Estimates on the budget balance of all municipalities showed a surplus of EUR 617 million in 2019, down to EUR 72 million in 2020 and turning into a deficit in 2021 with -EUR 325 million. It has therefore been estimated that the ‘scissors effect’ of the crisis on municipal finance could be EUR 545 million in 2020 and EUR 397 million in 2021.

ECONOMIC AND SOCIAL STIMULUS PLANS: The central government submitted the Recovery and Resilience Plan (RRP) to the European Commission (EC) in April 2021. The RRP allocates EUR 14 billion in grants and EUR 2.7 billion in loans from the Recovery and Resilience Fund, using entirely the grant allocation and only a quarter of the available loans. The RRP focuses on social resilience, as well as the climate and digital transitions, aiming to promote more sustainable and inclusive growth. Lastly, the government is considering a recapitalization program for firms. In May 2021, authorities announced a Plan to Reactivate Tourism, which foresees an investment of EUR 6.1 billion in the sector.