The Introduction of the “Balanced Budget” Principle into the Italian Constitution: What Perspectives for the Financial Autonomy of Regional and Local Governments?

This paper analyses the impact on regional and local authorities of Articles 117 and 119 of the Italian Constitution as amended by Constitutional Law no. 1/2012. In particular, it attempts to verify whether the new formulation of these constitutional provisions materializes the risk of a significant reduction in the financial autonomy of both Regions and Local Governments. With the constitutional reform the legislative competence of “harmonization of public account” has become an exclusive State competence, the “balanced budget” principle has been extended to Regions and local authorities and public borrowing has been broadly prohibited. What is the actual significance of the changes introduced by Constitutional Law no. 1/2012 for the financial autonomy of Italian sub-national authorities? Is it time to recognise that the goals of financial independence of Italian fiscal federalism, launched by the reform of Title V of the IC, must give way to a new organization of public finance, where a central role is played by the central government in order to comply with the financial constraints arising from new challenges of the European economic integration process?