Subnational governments and governance in Estonia: a paradoxical path of re-centralization despite strong local autonomy

This chapter gives an overview of the key characteristics of local governments and local governance in Estonia, with a specific focus on the elements of centralization that have taken place over the past decades. The central government has gradually increased its powers vis-à-vis the local governments, and the local level has not been able to offer a significant counterbalance to the national level. Increased centralization has taken various forms, ranging from increasing limitations on local government finances (including borrowing constraints and limiting the types of local taxes), shifting from block grants to conditional and earmarked grants, taking over some local government functions, and imposing municipal amalgamations in a top-down manner. These developments have given rise to an increasing discrepancy between the constitutional guarantees of local government autonomy on the one hand and their actual financial autonomy and overall clout and power in the governance of Estonia on the other.