Abstract

Decentralization refers to redistributing or dispersing powers away from a central authorities to local or regional level. The expected positive outcomes of decentralization of powers are: growth of citizens’ political participation through their involvement in the decision-making process, improving the quality of public services, saving budget. The possible negative consequences are: threat to macroeconomic stability, hard budget constraints. Misbalance in proportion of distributed powers and the funds available is the main reason for the possible negative result of decentralization. Therefore, the functions of all governmental levels and local authorities must be stated clearly. In order to minimize potential risks of ineffective management, as a consequence of excess or lack of powers and necessary resources subsidiarity principle should be used. It is a necessary criterion for determining how powers should be divided between different levels of government and local authorities, taking in consideration peculiarities of regions, society and willingness of local elites and citizens to participate in the governance process.