Economy & Business, Volume 8, 2014

Abstract: The process of implementing structural reforms and as part of them fiscal reforms, in the Western Balkan countries during the post communist phase of their development was conducted in unfavourable socio-economical and political circumstances. Even besides the strong technical and financial assistance provided by relevant international institutions such as the World Bank, the International Monetary Fund and the European Union, the process failed in terms of meeting the objectives in the field of sustainable economic development, elimination of (social, economic and fiscal) disparities on the local, regional and central level, decreasing unemployment etc. The process of transformation of the Western Balkan countries was characterised by obvious failures and delays that in fact had consequences on the dynamics of the process of EU and NATO integration. The process of fiscal consolidation is a very complex issue and depends on many endogen and exogen factors that determine the success of fiscal reforms both on the local and central level. In the analysed countries the implementation of fiscal reforms has been closely connected to macroeconomic stability, fiscal consolidation, socio-economic cohesion and the functionality of the state of law. Western Balkan countries have many similarities and difference both from a qualitative and quantitative point of view. The level of fiscal decentralization in these countries is far behind the EU in terms of volume, structure and quality of funds being managed at the local and regional levels. This paper aims at determining the real level of financial and fiscal decentralization, as well as to provide a comparative analysis of the Western Balkan countries and between them and the EU. Having this in mind, the paper will be focused on providing insides regarding the process of fiscal decentralization in the Western Balkan countries (Macedonia, Albania, Kosovo, Montenegro, Bosnia and Herzegovina and Serbia) and the EU. Based on such analysis, proper conclusions and recommendations about solving fiscal and legal deficits and the possible advancements if this process based on the successful EU models of decentralization in multiethnic countries will be made.