Without local economies, the state will fall.
12. 12. 2022

Without local economies, the state will fall.

Inflation, the refugee crisis, the energy crisis. According to František Lukl, chairman of the Union of Towns and Municipalities of the Czech Republic, all this is currently affecting municipal budgets. In addition, they are still trying to spin the wheels of their regional economies and support local merchants, recommends the Corrency tool.

How will the energy crisis affect cities and municipalities next year?

Mayors and councillors now have a very difficult task ahead of them: to navigate the energy market quickly. Anyone who has had to secure energy for the next year knows that navigating the volatile energy market is difficult.


It does not matter whether you are dealing with energy for a household or for a whole municipality, let alone prices that are logically incomparable to those before the Russian aggression in Ukraine.


It's almost halfway through December, and municipalities and cities still don't have contracted energy supplies for 2023?

Some of them, unfortunately, still don't. It is still not a complete exception that municipalities have not resolved the issue of suppliers. But I have some sympathy for them.


Are they contacting you for consultation?

Absolutely. Together with the Ministry of Regional Development and the ČEZ Esko Group, we have therefore put together a guidance material for municipalities to guide them through the process of contracting electricity and gas suppliers for next year.


What do you advise them?
The simplest solution, i.e. to follow the rules of the open tender procedure or the negotiated procedure without publication. Some proven platforms meet these conditions, such as the Českomoravská komoditní burza Kladno or the PXE exchange.


Leaving aside energy, what shape are municipal budgets in?

This is of course very individual, but the negative factors are probably common to all of them. The covid, which has largely crippled public budget revenues, is still reverberating. And then, of course, we are dealing with the impact of the refugee crisis, because it is the municipalities that are putting the concern for refugees into practice. It is a necessary thing, but it is expensive and there must be a plan to balance it within the public budget.


You don't get help from the state?

Not enough. Cities and municipalities are being burdened with more and more obligations, but financial assistance from the state is not increasing in line with that. So we find ourselves between a rock and a hard place. For example, we have asked legislators to redirect a portion of war tax revenues to municipal budgets. The principle should be similar to that of the budget allocation of conventional taxes, where part of it goes to the municipalities. However, municipalities have been excluded from the war tax for a reason that is incomprehensible to me.


Isn't there a problem with how municipalities would use the money?

Careful, we are not talking about increasing the remuneration of councillors and officials. These funds are supposed to go into the local economies, which logically suffer in this situation. Few people can blame people for considering their spending very carefully these days, but on the other hand, it is then up to the municipalities to ensure that the economic cycle in their regions does not stall. It may not seem that way to some people because there is talk of big central measures, but without local economic relations, the state could wrap things up financially.


Reviving the local economy is such a mantra, but how can local government realistically do this? Perhaps to keep the current conditions from bringing down a pub or a shop...

As it happens, while the state is vehemently tackling regulation at the highest level, there are projects in the private sphere that seize the opportunity themselves. I had the opportunity to observe the Corrency project in practice during the time of the covid as the mayor of Kyjov, which gives not only the municipality's leadership, but also its inhabitants, the opportunity to support those who actually create the local economy.


It brought our merchants almost two million crowns extra just by people coming to shop with them. Over 1 500 citizens got involved, so I think it simply works and people are keen to support the economic ferment in their neighbourhood.


How does it work?

You set aside a certain amount of money from your budget to support the local economy. And it doesn't have to be purely the municipal budget; you can tap into EU funds or involve businesses and entrepreneurs directly. Then you identify a group of people to whom you will provide this help - it can be the elderly, families with children and so on. In the case of the trader, these citizens only pay half of the money, the other half is made up by us through Corrency. So we are helping two things: firstly, vulnerable populations, and secondly, merchants who are struggling to pay for things like utility bills.


But isn't that too much of a local, unsystematic solution?

I don't think so. We can already see the shift to localism in the energy sector, and I think that economic life will slowly move to smaller units as well. But of course we were interested in whether we put money into something meaningful. From the feedback we judge that would be the right move. Almost 90 per cent of people told us it was easy to use and some traders told us it saved their lives existentially.


Because if you set up a new bistro, for example, people don't know about you straight away. But when you're in a program that gives people the opportunity to save money, they'll come. One macro producer even told us that while it would have been easier to give one-off help, through Corrency the help was fairer. I have heard the same feedback from Prague 1 or Prague 18. I think we will see a lot more models like this.


Author: František Strnad

Source: https://www.idnes.cz/ekonomika/domaci/mest-a-obce-lokalni-ekonomika-frantisek-lukl.A221208_203616_ekonomika_rts


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