Main Article Content
European Union (EU) regional policy has played a great role in the transition economies of Central and Eastern European Countries (CEEC). However, the effective implementation of EU regional policy requires that local and regional governance systems in Member States are compatible with EU practice and regulatory norms (e.g. partnership) emphasising the importance of the well-performing sub-national government. The article discusses Estonian local governments’ absorption capacity problems in the EU Structural Funds by investigating the main factors restricting them from using the aid. The article is based on a survey among Estonian local governments conducted in 2005. This survey was also supported by meetings of the representatives of three Estonian counties – Lääne-Viru, Pärnu and Jõgeva – and the City of Tartu. The results show that Estonian local governments regard Structural Funds as one of the most important instruments in their socio-economic development while the capacity to absorb the funds is limited due to the low administrative and financial capacity of the local government level.