The Working Group will focus on the effect of crisis on local government finance. In the NISPAcee region there have been several fiscal and economic crises over the last two decades. First of all at the change of the system, the so-called Transition of CEE countries and the countries of the former Soviet Union was caused by a very deep political and economic crisis. During the transition the countries of the region have also phased crises depended on their individual situation. The nature and the background of the actual crises is different because it is related to a world wide financial and economic crisis which effects both advanced market economies and transitional economies as same as the Third World countries. The present situation is unique that respect there were only two such world wide crises in the last century: the World Economic Crisis in 1929-1933 and the Oil Price Crisis in the 1970s.

The core research question is that how public sector responds to this situation. The previous world wide crises increased the role of the state to eliminate market failures. Within the region the Transition has been a process of decentralisation of an entirely centralised political and economic system. What are the reactions to the actual crisis in individual countries: increasing concentration of power (fiscal capacity) on the level of Central Government or increasing role of decentralisation among the government levels and/or between the government and the private sector?