Finland: Restructuring local government and services

In 2007, Finland started implementing the act on restructuring local government and services (also known under its acronym PARAS reform), which aims at creating economies of scale by encouraging voluntary municipal mergers and municipal co-operation areas for public service delivery. Given the high degree of municipal autonomy in Finland and the country’s tradition of consensual decision-making, it was not possible to use threats or sanctions to force municipalities into implementing the reform (as was the case in Denmark, where municipalities were given one year to merge voluntarily, and if they did not comply, the central government could impose the merger). Municipalities could therefore choose between merging and joining larger co-operation areas, but financial incentives were used to encourage municipalities to merge. Municipal mergers were already on the agenda before this reform, and in 2002, a substantial increase in merger subsidies was granted to municipalities wishing to merge. This led to a reduction of the number of municipalities from 452 in 2001, to 432 in 2005. The PARAS reform () further reduced the number of municipalities to 348 in 2009, and municipalities have until 2013 to benefit from financial incentives under the current framework.