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Abstract Slovenia has only one tier of sub-national government, that is, municipalities. Currently, there are 212 municipalities, and they exhibit the same responsibilities they need to provide to their residents, regardless of their size, and these differences in size are even in the range 1:100. The new national strategy for the development of local self-government has, therefore, stressed the necessity to promote cooperation among municipalities and even potential mergers, not just to ensure cost-effectiveness but also to increase the capacity of municipalities to perform various developmental tasks. Consequently, the aim of the article is to analyse the evolution and factors driving inter-municipal cooperation and municipal mergers, where Slovenia is taken as an example, and case study approach is used in this manner. The results of the analysis indicate that territorial fragmentation at the local level has been accompanied by the increase in the inter-municipal cooperation, although some time lag can be observed. Moreover, the increase in the cooperation can be observed in particular with the onset of economic slowdown and fiscal stress emergence. The results also portray that substantial territorial rescaling cannot be expected in the near future, as suggested by the analysis of driving factors that should contribute to this process, as well as by rather weak ability of central government to promote the process. Consequently, from the practical perspective, we might expect larger role of more in-depth trans-scaling strategies as a mechanism to overcome the problem of sub-optimal size of municipalities in Slovenia.
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