Abstract. Local authority financing is currently at the heart of the political debate. All the states are faced with the challenge of reconciling the need to control and reduce public spending with greater financial autonomy in local government; they are accordingly seeking ways of achieving an equitable distribution of financial resources among the different levels of government in a context of budgetary cutbacks at every level of public administration. If strengthening democracy means strengthening local selfgovernment, this in turn means establishing systems of financing for local authorities which are at once efficient, fair and consistent with the state's economic imperatives. In other words, the principle of subsidiary, decentralization and local finances are all interdependent.

In Romania this process started in 1990 and it is on the move even today. This paper is trying to find, by using economic instruments, what is the degree in which we succeed to create a real local financial selfgovernment.

Keywords: self-government; local authorities; local communities; income; Romania.