Emerging Issues in Italian Fiscal Federalism: The Case of Municipalities

Since 1990, the Italian public sector has undergone a massive process of reform and modernization (Mussari 2005). This process includes fundamental changes in two key fields: a broad introduction of new public management (NPM) concepts and practices; and the gradual shifting of powers, competencies, and responsibilities from the central to the lowest levels of government. The main purpose of these reforms has been to enhance efficiency, accountability, and manageability in the multi-tiered public sector, moving Italy from a centralized, unitary system to a decentralized model in which greater autonomy and a significant role are accorded to local governments. The impact and results of these reforms have been controversial. In particular, these reforms have led to duplication and confusion in areas of shared competency among different tiers of government, scarce financial autonomy of local governments, and a financial system based on historical expenditures, which has triggered an increase in Italian public spending and a decrease in intergovernmental accountability.