The interior ministry on Saturday rejected claims by the Union of Municipalities that the government is shifting the cost of local government reform onto residents, insisting it has more than doubled state funding for municipalities since the reform was introduced.

The union has rejected the government’s proposed mechanism for adjusting the annual state grant and announced measures, but the ministry said the allegations “do not correspond to the actual facts”.

It said the state had significantly increased financial support for local authorities while also absorbing a substantial share of the costs arising from the implementation of local government reform.

The ministry said the €117 million annual state grant, established under the Municipalities Law of 2022, was incorporated into legislation during parliamentary discussions on the reform with the agreement of the Union of Municipalities.

It added that the government itself recognised that the grant could not remain fixed indefinitely and should instead be adjusted to reflect changing economic and fiscal conditions, including inflation.

To that end, the interior ministry, in cooperation with the finance ministry and following consultations with the Union of Municipalities, developed what it described as an objective and predictable mechanism for revising the grant.

Beyond the €117 million annual allocation, the ministry said the government had approved an additional €15 million per year for the maintenance of primary road networks and a further €12 million annually to compensate municipalities for the loss of revenue following changes to development licensing.

According to the ministry, the €15 million was based on a study carried out by the Union of Municipalities itself and was five times higher than its original estimate of €3 million.

Under the government’s proposal, the three grants would be merged into a single annual state grant worth €144 million, securing the funding on a permanent basis while also responding to a request from the municipalities.

The ministry said this represents a 103.4 per cent increase compared with the previous total annual state grant of €70.8 million.

It added that the proposed adjustment mechanism would link future increases to an objective fiscal indicator based on the state’s net primary expenditure, ensuring that government support keeps pace with economic conditions while remaining consistent with the country’s fiscal obligations.

Based on the proposed formula, the ministry said the total state grant is expected to rise from €148 million in 2027 to €160 million by 2030.

It also argued that adjusting the grant every three years would give municipalities greater certainty when planning their budgets and operational needs.

“The government has demonstrated in practice that it supports both the local government reform and the financial sustainability of municipalities,” the ministry said, adding that this support is reflected in the doubling of state funding, additional financial commitments and continued investment in municipal development projects.

The Union of Municipalities had argued that the formula would leave municipalities underfunded and ultimately transfer the financial burden of the reform to local taxpayers.