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In the first phase, small local governments are given the opportunity to merge voluntarily and get support from the state budget. In the second phase municipalities will be united by the government without getting a one-off financial grant.

The state will pay voluntarily merged local government units meeting the criteria 100 euros per inhabitant, but not more than 800,000 euros and not less than 300,000 euros per merging municipality, it appears from an explanatory note to the bill.

The minister of public administration has proposed to the government to allocate an extra 250,000 euros to municipalities with at least 11,000 inhabitants as a result of merger or where the merger takes in the whole county.

The second phase of the reform will be carried out at the government's initiative, meaning that municipalities which fail to achieve the 5,000 inhabitant quota by Jan. 1, 2017 will be united by the government. The local government units will be given three months to form their positions on the government's proposals and carry out the proceedings prescribed by law including a public opinion poll, the explanatory note says. According to the note, financial support is not paid in the second phase of the reform so as to motivate municipalities to unite voluntarily.

The first phase of the reform will last till January 1, 2017 and the second phase will be launched thereafter.

Both voluntary and government-initiated mergers will step into force with the local council elections to be held in October 2017.

The aim of the reform is to form local self-government units that are able to provide their residents with better public services, increase the competitiveness of regions and fulfill the duties arising from law, Minister of Public Administration Arto Aas earlier said.