This paper aims to present a case study for municipal reform by investigating the current situation of the municipal system in Saxony. This system is characterized by an urgently needed improvement in infrastructure and by a continually decreasing population. A study of such a municipal system will help us to understand the principle and methods of current municipal amalgamations in Japan. After the unification of Germany, municipalities in the new states that lacked self-government for more than half a century, rapidly reorganized their administrative areas and functions. The Saxony Ministry of the Interior decided to form one-tier (Einheitsgemeinde) or two-stage municipalities (Gemeinde-verbande), with a minimum population of 8, 000 in highly populated areas and with more than 5, 000 inhabitants in rural areas, and at the same time making efforts to abolishing member municipalities with less than 1, 000 inhabitants. Ever since the municipal system of the state of Baden-Wurtemberg was introduced as a model in the state of Saxony, municipalities are now characterized by two types of two-stage municipalities: administrative communities (Verwaltungsgemeinschafi) and administrative unions (Verwaltungsverband). An administrative union consists of a union of member municipalities. An administrative community, however, is an organization of municipalities that entrust a part of the administrative functions of member municipalities to a large town called the fulfilling municipality (erfullende Gemeinde). The type of two-stage municipality is selected according to geographical and historical conditions in the municipal groups. If there is a large central town within the area, an administrative community is formed, whereas an administrative union is usually formed in rural areas lacking a central place. In the state of Saxony, however, it is remarkable that there are more administrative communities than administrative unions, unlike the situation in states such as Baden-Wurtemberg and Thuringia. In addition, owing to the core administration (Kernverwaltung) being in the office of the administrative union or in a fulfilling municipality in Saxony, only small sections of the administration remain in a member municipality, unlike the situation in the state of Baden-Wurtemberg. In the municipalities of new states that depend substantially on the normal state subsidy (Schlusselzuweisungeri) due to lower taxable incomes, strengthening their financial power is considered to be an important factor for the municipalities, to rapidly improve their infrastructure. As a result, in the future we can expect an increase in one-tier municipalities based on amalgamations in the future, because they are more profitable. This is based on economic reasons such as administrative efficiency, decreasing administrative costs, and increasing state subsidy. Moreover, the continual decrease in population will lead to an increase in one-tier municipalities. Naturally, there are opposite opinions expressing concern about the weakened rights of self-government that had been finally gained after a long time, anxiety for the future after amalgamation, and the retrenchment of many mayors and councilors. Conversely, the difficulties of administering two-stage municipalities might encourage a shift to one-tier municipalities. During the last thirty years there were hardly any municipalities in the old German states that shifted from the two-stage to the the one-tier system. Although two-stage municipalities are certainly not so financially efficient as one-tier ones, it was considered important for citizens to maintain the concept of self-government as symbolized by the words Burgerndhe and Ubersichtbarkeit. Here, we can recognize the obvious contrast in municipal administrations between the old and the new states of Germany. The principle of proceeding with municipal reform in Saxony is also different from current

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