Regional Administration: Fiscal Framework

This paper addresses the budgetary framework of the Portuguese autonomous regions, analysing its consistency with the General Government budgetary framework. The Constitution of the Portuguese Republic grants high financial autonomy to the two autonomous regions of Azores and Madeira, and such autonomy should be reflected in high fiscal responsibility. It is concluded that the numerical fiscal rules applicable to the regions are quite different from those applicable to the General Government, arguing that the former should be closer to the national rules, with the necessary adaptations, considering that the economic stabilisation function is mostly performed by the national budget. Ways of approximation are suggested in compliance with the general principle of mutual solidarity established in the Budgetary Framework Law. However, the specificity and the complexity of designing fiscal rules for sub-national entities recommend a thorough technical preparatory work that precedes the indispensable political discussion. It is also concluded that the Autonomous Regions' Finance Law lacks the specific norms that define the role of the Portuguese Public Finance Council as the entity responsible for giving an opinion on the compliance with the planned budgetary discipline rules. This contradicts national and European legislation provisions, which give this independent body the task of monitoring compliance with numerical fiscal rules.