Municipalities and regions: approaching the limit of decentralization?

Denmark is a highly decentralized unitary state with a three-tier administrative system consisting of central government, 5 regions, and 98 municipalities. Danish municipalities are some of the largest compared to the rest of Europe. They are multi-purpose entities responsible for a wide range of technical and social services and have for decades been entitled with a high level of fiscal autonomy. A major reform of the local government system in 2007 followed by a strengthened national spending regime influenced the decentralization framework and autonomy of local governments in Denmark. While the Danish local government system continues to be among the most decentralized local government systems in Western democracies and has demonstrated a high degree of adaptability to changing conditions and externalities, it also faces a number of challenges in order to maintain the delicate balance between being local self-government and implementing agency of the state. These challenges include issues like coordination and capacity for handling complex decentralized tasks, pressure on the institutional framework for coordination of the local government’s economic activities with overall national policies, and an increasing politicization of the equalization scheme.