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Public debt and financial sustainability of the italian public finances

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  • Federico Pica
  • Salvatore Villani

Abstract

The analysis presented in this paper deals with two main issues: the one of debt sustainability, meant in the particular acceptation proposed in this article, and the one of the effects of debt decumulation for the various territorial communities, in particular for the weak areas of Italy (Mezzogiorno). The proposed analysis aims at showing some possible outcomes of the current economic crisis. Four hypotheses, concerning various kinds of constraints regulating the variation over time of the debt amount, are proposed: the zero (or constant) debt hypothesis, the invariance of GDP-debt ratio, the hypothesis of a ceiling on public debt and, lastly, the case of a programmed path of public debt reduction (the Fiscal Compact). In the best case proposed (the zero debt hypothesis), the results prefigure a prognosis of stagnation, which is more serious for the enterprises and the families of the Mezzogiorno than for the rest of Italy. .

Suggested Citation

  • Federico Pica & Salvatore Villani, 2012. "Public debt and financial sustainability of the italian public finances," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2012(107), pages 5-34.
    • Handle: RePEc:fan:steste:v:html10.3280/ste2012-107001
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    More about this item

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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