Despite the holiday period, August 2026 was marked by a number of important decisions adopted at the level of the European Union and its Member States, which directly or indirectly affect the functioning of local government systems. Particular attention was given to the financial capacity of municipalities, the development of local and regional infrastructure, climate adaptation, the energy transition, urban mobility, the recovery of areas affected by natural disasters, and the improvement of intergovernmental fiscal relations.

Across different Member States, decisions were adopted and initiatives launched that demonstrate the gradual transformation of the role of local authorities. Municipalities are increasingly viewed not only as implementers of national policies and providers of basic public services, but also as key actors in investment, climate, energy and territorial policies.

Three interrelated trends were particularly evident in August. First, greater attention is being paid to the financial autonomy and capacity of local authorities through reforms of local taxation, intergovernmental transfers and mechanisms for financing municipal responsibilities. Second, a significant share of new investment is being channelled into climate resilience and the modernisation of local infrastructure, from protection against floods, drought and heat to energy efficiency, smart grids and sustainable urban mobility. Third, the trend towards bringing European investment closer to communities is continuing, with EU and national budget funding increasingly being translated into concrete projects at the level of municipalities, cities, districts and functional urban areas.

The most illustrative examples in this context are the decisions adopted in Italy, Spain, Slovenia and Germany, as well as the corresponding decisions and financial mechanisms of the European Union.

This article therefore looks at these developments not merely as a list of legislative and regulatory acts adopted, but also considers which of the changes introduced in August 2026 may have long term significance for the development of local self-government in EU countries, and which may be of particular relevance to Ukraine.

 

The Battle over the EU Budget for 2028 to 2034: European Cities and Regions Defend Funding for Cohesion and Development

At the end of August 2026, a key financial debate emerged within the European Union that could shape the future of local and regional development for the next decade. On 27 August, a group of six donor countries, Germany, Denmark, the Netherlands, Austria, Finland and Sweden, called for substantial cuts to the proposed EU Multiannual Financial Framework (MFF) for 2028 to 2034, amounting to hundreds of billions of euros compared with the European Commission’s earlier plans.

For municipalities and regions across the EU, this initiative creates a risk of direct reductions in Cohesion Policy funding, which is a major source of co financing for local infrastructure, energy efficiency, environmental projects and digital transformation. European networks representing cities have already adopted a common position: Cohesion Policy should retain its priority status, while municipalities should have direct access to EU financial instruments without excessive centralisation at national government level.

At the same time, concerns are growing in rural areas. In Spain, for example, local action groups (LAGs) publicly expressed concern in August about the future of the LEADER programme after 2027. The proposed changes to the budget architecture could lead to the removal of a dedicated budget category for rural development and weaken the bottom up approach, depriving smaller communities of a guaranteed source of funding for local initiatives.

These developments point to a fundamental trend in the development of local self government in the EU in 2026. The focus of the debate has shifted decisively from expanding the formal powers of municipalities towards securing reliable sources of funding for those powers after 2027. For Ukraine, which is preparing to integrate into the EU funding system, this budget debate sends a clear signal: preserving local development instruments and ensuring direct access for municipalities to European resources will require early, strong and coordinated advocacy at European level.

 

Germany: Strengthening the Role of Municipalities in Climate Adaptation

On 26 August 2026, the Federal Government of Germany discussed further measures to address extreme heat, drought and other impacts of climate change. The Government plans to strengthen coordination between the federal government, the Länder and municipalities and to make more effective use of existing programmes supporting climate adaptation. The Federal Government’s announcement on measures to address heat, drought and other climate impacts

For local authorities, the decision is particularly important in terms of access to funding. The €100 billion allocated to the Länder through the special fund for infrastructure and climate protection can also support measures addressing the impacts of extreme weather and climate change. The Government emphasised that the Länder and municipalities have a particularly strong understanding of local needs and should therefore play an important role in setting investment priorities.

This decision strengthens the role of local authorities as direct implementers of climate adaptation policy and creates opportunities to finance local projects aimed at protecting people and territories from extreme heat, drought and flooding, as well as improving the resilience of local infrastructure.

 

Italy: Strengthening the Financial Autonomy and Capacity of Local Authorities

On 7 August 2026, Italy adopted two complementary legislative acts that significantly modernise the functioning of territorial self government: Decree Law No. 144 (Decreto Legge No. 144/2026) and Legislative Decree No. 147 (Decreto legislativo No. 147/2026).

Decree Law No. 144 is aimed at addressing urgent administrative issues. It simplifies regulatory procedures for municipalities and provides them with tools to accelerate the recruitment of specialists needed to implement strategic investment projects and deliver public services. Particular attention is given to civil protection. The document establishes more flexible budgetary mechanisms and powers for local authorities in areas exposed to heightened natural and technological risks, including during seismic activity in the Phlegraean Fields area.

By contrast, Legislative Decree No. 147 finalises the reform of regional and local taxation, shifting the focus from a punitive approach towards partnership with taxpayers. The reform significantly reduces penalties for unintentional errors in the payment of local taxes, including IMU and TARI, and introduces direct incentives for compliant taxpayers, such as reduced tariffs where payments are collected automatically by direct debit. At the same time, the State is strengthening financial incentives for municipalities. Municipalities will receive 100% of revenues resulting from cases of tax evasion identified by them during the period from 2026 to 2028. These measures are complemented by the full digitalisation of tax declarations and updated procedures for settling outstanding debts.

An important practical complement to these legislative changes was the launch by the Italian Ministry of the Interior (Ministero dell'Interno) of targeted funding amounting to €98 million to support local infrastructure.

The funding is intended to finance the preparation of final and detailed design documentation (progettazione esecutiva) for 367 municipal projects. The funding addresses key local needs, including measures to improve hydrogeological safety, such as protecting areas from landslides, flooding and water erosion, improving the safety and energy efficiency of schools, modernising the local road network, and restoring public buildings. A key condition for retaining public funding is the rapid launch of procurement procedures, with contracts for design services to be concluded within six months. This is intended to ensure that high quality projects are ready for the rapid commencement of construction works.

The simultaneous adoption of these acts illustrates a clear European trend in the development of multilevel governance. First, the Italian model confirms a shift from reliance on grants towards strengthening the own fiscal powers of local authorities. The central government is incentivising local areas to expand their tax base and improve tax collection. Second, the concept of Cooperative Compliance is being introduced, whereby the main objective of tax administration is predictability and voluntary compliance rather than pressure through sanctions. Finally, long term financial autonomy is being combined with a high degree of administrative flexibility, giving local authorities greater scope to respond rapidly to emergency challenges.

 

Spain: Strengthening the Institutional Capacity of Local Government through Support for the National Association of Municipalities

On 25 August 2026, the Spanish Council of Ministers approved a Royal Decree regulating the provision of a direct state subsidy of €2.625 million to the Spanish Federation of Municipalities and Provinces (Federación Española de Municipios y Provincias, FEMP). The decision provides stable funding for the operational activities of the country’s main local government association for the current year.

FEMP brings together the vast majority of Spanish municipalities, provinces and island councils, serving as a key partner of the central government in public dialogue, the coordination of reforms and the development of local policy. The decree adopted by the Government establishes the legal basis for direct funding of the association’s operating costs, covering activities ranging from the work of expert committees and legal support for municipalities to routine infrastructure maintenance and the procurement of professional services. The funding is provided through a simplified procedure involving monthly payments based on an approved budget and implemented through a bilateral agreement.

The main value of this decision lies in its recognition of the critical role played by associations of local authorities in the functioning of the public administration system as a whole. Unlike targeted funding for individual infrastructure projects or grants for individual municipalities, the direct subsidy to FEMP represents a direct investment in the quality of policy analysis, regulatory expertise and representation of the interests of local authorities across the country.

The Spanish case, like the Italian example, demonstrates a consistent European approach to developing multilevel governance. First, the State views the national association of municipalities not as a lobbying group or supervisory body, but as a strategic partner in policymaking, whose institutional capacity constitutes a public good. Second, it confirms that the effectiveness of decentralisation depends directly on the existence of a strong professional platform capable of defending the rights of local authorities, providing practical advice to smaller municipalities, and maintaining an equal and constructive consultative dialogue with ministries and Parliament.

 

Slovenia: Decentralisation of Public Administration and Bringing Government Closer to Municipalities

In July 2026, Slovenia’s Ministry of Cohesion and Regional Development (Ministrstvo za kohezijo in regionalni razvoj) took a notable step in line with European approaches to territorial governance by officially relocating its headquarters from the capital, Ljubljana, to the country’s second largest city, Maribor. The Ministry officially relocated its headquarters to Maribor. Throughout August, the Ministry continued to establish its operations at the new location, demonstrating a shift from a capital centred approach towards direct coordination of municipal initiatives from within the region.

The relocation of the government ministry responsible for this policy area represents a practical implementation of the concept of polycentric development. The main objective of this step is to reduce the distance between the central executive authority responsible for cohesion policy and its direct beneficiaries, including municipalities, regional development agencies and local government associations. Locating the Ministry in Maribor is intended to balance the economic and administrative weight of the capital and the eastern regions of the country, while stimulating local labour markets and attracting regional expertise to the civil service.

The Ministry’s new regional presence is supported by the continued administration of targeted investment for local authorities. In August, for example, the Ministry approved the allocation of more than €200,000 from the European Regional Development Fund (ERDF) for the construction of a strategic cycle route connecting the Markovec district with the centre of the coastal municipality of Koper. This approach illustrates how European resources can be directed towards concrete local needs, including the development of micromobility, local environmental safety and the modernisation of urban space.

Slovenia therefore demonstrates an important direction in the transformation of public administration across EU countries. The spatial deconcentration of government bodies helps to break down the mental and administrative barriers between the centre and the periphery, turning regions into centres for strategic decision making. At the same time, bringing coordinators of European integration funds closer to municipalities simplifies access to advice and support and enables municipalities to use cohesion policy funding for local development more quickly and effectively.

 

Overall, the key trend across EU countries remains the increase in resources and powers at the local level, alongside the expanding responsibility of municipalities for implementing national and European policies.