Deficit control, fiscal rules and influence on intergovernmental financial management: Evidence from the Italian case

In European Union (EU), fiscal regulation and coordination initiatives among supra-national, national and sub-national tiers of government have progressively increased over the last decade and Member Countries established different inter-governmental fiscal arrangements in order to manage domestic fiscal issues. In this paper we use the case of Italy to shed light on the implications on public sector accounting and financial management of fiscal rules set for macroeconomic fiscal stability. We consider EU deficit and debt rules that EU member-States are obliged to report in order to be compliant with the Maastricht Treaty criteria and then we assess their impact on domestic intergovernmental financial management, budgeting and accounting practices. Our analysis shows that budget decisions at the central and the local level are driven mainly by economists and accounting professionals rather than elected politicians. These challenges put a new emphasis on the reciprocal role of bureaucrats and politicians in public financial management and give rise to the question of what government level – supranational, national or sub-national – should be accountable to the public for cutbacks driven by fiscal rules.