The draft law demands reports on municipal mergers be produced by April 2014, if they are to receive extra funding to ease the transition. Mergers would be carried out by 2017 at the latest.
Local councils should inform the government which neighbouring municipalities they are considering joining by the end of 2013, when the government will assess the situation.
The Finance Ministry can mandate reports on mergers for any municipalities that have not announced their intentions by April 2014.
Municipal workers will have a five-year protection from redundancies relating to the 2014-2017 reform.
Earlier this year the government abandoned a pledge to reduce the number of municipalities from the current 320 to under a hundred. Ministers argue the reforms are necessary to ensure the viability of services in depopulating areas.