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Local Governments and Administrative-Territorial Reform

Regional affairs in the Ministry of Finance

Administrative reform

The objective of the administrative reform is the establishment of capable local governments that can develop every aspect of local life, so that people can live well.

  • Previous mergers of local governments have demonstrated that better and more accessible services are provided with joined forces and the competitiveness of the region improves.
  • Pursuant to law, a local government must guarantee compulsory basic services for its residence, but this cannot always be done if the present fragmented administrative arrangement continues.
  • Only a capable local government can balance public authority and be an equal partner to the state and businesses.

Regional Affairs

Regional affairs divide in three: regional development, regional management and spatial planning.

Regional development

The key place in the regional development in Estonia is held by the development of centres and making better use of regional differences. Regional policy centres around large regional differences, the concentration of the population and economic activities in cities against the background of a decrease in population, the weakening of second-tier centres and the large distances that curb the development of rural areas.

Regional management

Regional management covers the performance of the functions of public administration and the provision of public services on the county level or across counties. The state’s regional management is carried out by 15 county governments on the level of territorial management and the local administrative units of state agencies. According to the Riigikogu resolution of 14 June 2016, county governments will stop operating in Estonia as of 1 January. 2018

The administrative territorial reform is the biggest challenge in regional management.

Spatial planning

The main purpose of spatial planning is reaching an agreement about the principles and conditions of the development of a land area. The Estonian planning system consists of six types of plans and proceeds from the principle that a plan of a more general level provides the output for a plan of a more detailed level. Read more »


Local Governments Financial Management

All matters of local life are organised and resolved by local authorities, which operate independently on the basis of law. They also have independent budgets, which are formed on the basis of and according to the procedure set out in the Local Government Finance Management Act.

Local authorities comprise a significant part of general government finance. Their consolidated share in total general government expenditure is 25%.

The Ministry of Finance develops the financing (incl. equalisation and support fund division) and financial management principles of local authorities.

The main form of cooperation between local authorities and central government is the annual budget negotiation workgroups of the government committee established by the government and the delegation of the Local Government Associations Cooperation Assembly. The support allocated to local authorities, their cost base and matters concerning tax policy are discussed in the financial and tax policy workgroup formed by the Ministry of Finance.

Additional Information


Last updated: 16 August 2017