Multi-level Finance and the Euro Crisis
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Multi-level Finance and the Euro Crisis

Causes and Effects

Edited by Ehtisham Ahmad, Massimo Bordignon and Giorgio Brosio

Representing a unique contribution to the analysis and discussion of the unfolding Eurozone crisis in terms of the relationship between central and local government, this book addresses a number of important fiscal and political economy questions. To what extent have local and regional governments contributed to the crisis? To what degree have subnational services and investments borne the brunt of the adjustments? How have multi-level fissures affected tensions between different levels of government from the supranational to the local? This volume covers these and many other critical issues that have been largely ignored despite their relevance.
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Chapter 9: Economic crisis and fiscal federalism in Italy

Maria Flavia Ambrosanio, Paolo Balduzzi and Massimo Bordignon


The 2008–09 crisis represented the worst recession and financial crisis that Italy had experienced since the end of the Second World War. The most effective way to describe the situation of regional and local public finances since then is best expressed as a ‘war economy’. In an attempt to regain the confidence of markets, in the midst of the Euro crisis, the last Berlusconi government, and particularly the successor ‘technical’ government of Mario Monti in 2011–12, launched a massive fiscal adjustment program. This was meant to reduce public deficits and debt in a country already weakened by the recession. The fiscal stance of the succeeding governments was also tight, given the need to respect European fiscal rules, although less restrictive than the previous adjustments. The cumulate fiscal adjustment in the five years between 2008 and 2012 amounted to around 8 percent of GDP, mostly concentrated in the period 2011–13.

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