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The domestic stability pact in Italy: a rule for discipline?

Author

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  • Giuriato, Luisa
  • Gastaldi, Francesca

Abstract

The 1999-2006 versions of the Italian Domestic Stability Pact had many shortcomings and a modest impact with respect to the aim of aligning the fiscal behaviour of sub-national government units with the national commitments under the European Stability and Growth Pact. The Domestic Pact was revised in 2007 and 2008 to tighten the monitoring and sanctions framework and prevent some inefficient behaviour. However, some undesirable features still mar the new regime: no coordination exists between the Domestic Pact and the debt and tax constraints applied to local governments; a clear definition of the contribution of sub-national governments to aggregate compliance with the external rule is still lacking; flexibility has been introduced by means of an artificial reference budget balance; side effects on resource redistribution are ignored; and monitoring and sanctioning remain weak. Remedies for the above shortcomings can possibly be found in the domestic pacts of the other EMU countries. Most of all, the Domestic Pact should be adjusted to the specific characteristics of fiscal decentralization in Italy, where a large fiscal gap exists, revenue autonomy is constrained and a large share of the responsibility for spending is rigid and politically sensitive.

Suggested Citation

  • Giuriato, Luisa & Gastaldi, Francesca, 2009. "The domestic stability pact in Italy: a rule for discipline?," MPRA Paper 15183, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:15183
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    File URL: https://mpra.ub.uni-muenchen.de/15183/1/MPRA_paper_15183.pdf
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    References listed on IDEAS

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    Cited by:

    1. W. D. Gregori, 2014. "Fiscal Rules and Public Spending: Evidence from Italian Municipalities," Working Papers wp923, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Padovano, Fabio & Petrarca, Ilaria, 2014. "Are the responsibility and yardstick competition hypotheses mutually consistent?," European Journal of Political Economy, Elsevier, vol. 34(C), pages 459-477.
    3. Fiorenza Venturini, 2018. "The Unintended Composition Effect of the Subnational Government Fiscal Rules: The Case of Italian Municipalities," Working papers 70, Società Italiana di Economia Pubblica.
    4. Sergio Beraldo & Massimiliano Piacenza & Gilberto Turati, 2012. "Fiscal Decentralization In Weak Institutional Environments," Post-Print halshs-00706970, HAL.
    5. Bernardino Benito & Francisco Bastida & Ana-María Ríos & Cristina Vicente, 2014. "The causes of legal rents extraction: evidence from Spanish municipalities," Public Choice, Springer, vol. 161(3), pages 367-383, December.

    More about this item

    Keywords

    Domestic Stability Pact; fiscal federalism;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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