RIGA, Feb 13 (LETA) - This year's budgets of local governments are more stable than last year, but there are signals that the slight increase is at the expense of development, said Gints Kaminskis, chairman of the Latvian Association of Local Governments (LPS), in an interview with Latvian Television this morning.

He admitted that a slightly larger fiscal space provides local governments with relative peace of mind in the short term, but in the long term, austerity at the expense of the development budget can have negative consequences.

When asked what are the long-term development projects that municipalities tend to abandon in order to save money, Kaminskis mentioned the construction of infrastructure - streets and lighting. As for the maintenance of the municipal road network, he added that this is a "fantastically complex issue".

"As you know, we have not yet reached the 2008 road fund, and prices have risen, inflation, etc. What the municipalities are doing, we can only wonder how they can somehow still maintain those streets, those roads, with that money, even though there are problems also there," said the LPS chairman.

Asked about the necessary changes in the functioning of the financial equalization mechanism for local governments, Kaminskis replied that there was an agreement to resolve the issue this year. According to him, it is not normal that Riga and the municipalities surrounding the capital invest so much money in the municipal financial equalization fund, even though they need this money themselves.

The LPS chairman believes that the established system of taking money away from the richest municipalities to give it to the poorest is wrong. "The only solution is for the state to play a more serious role in equalizing the finances of municipalities, thus compensating for decisions that have been taken in the past and, consequently, funds have not been made available," Kaminskis said.

The representative of the municipalities said that it had been agreed to come to the negotiating table this year and resolve the issue. He expressed the hope that negotiations could start before the local elections.