Tools and Policies for the Governance of State and Local Borrowing

In Italy, federalism and the evolution of functions of local authorities, even if largely developed in recent years, are still on debate. The need to respect both the commitments on public budgeting, at European level, and the limits imposed to public funds' transferring, from the central government to the periferies, has driven local authorities in two directions: the search of alternative financial sources to support their investments and the optimisation of their debt management on current expenditures. The paper is on the recent state of art in this respect and investigates the composition and the structure of the financial sources used by local authorities in financing their needs. The analysis is on the effectiveness of traditional financial instruments provided by credit institutions, such as bank funds and the mortages supplied by the Cassa Depositi e Prestiti, and of more recent and innovative tools, such as the local bonds (i.e. BOC, BOP, BOR). Data at regional level show that still persist a clear obstacle for the municipalities to finance themselves directly on the financial market, especially if located in the Southern Italy. Large part of these difficulties comes from the sector regulation and the specific technical features of the bond emissions (i.e. rating and liquidity) that leaves the local bonds' market in a weaker position with respect to other financial instruments. To promote a more efficient process of local development selfsustainable through local borrowings is necessary a strong policy action and to solve the problems of fund raising carried by the municipalities.