Institutions of Intergovernmental Fiscal Relations

Challenges Ahead

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Intergovernmental fiscal institutions are the overarching framework for relations across government levels. They comprise the constitutional set up of a country; the division of power between government levels; the prevalence of fiscal rules across government levels; intergovernmental budget frameworks; the role of independent bodies such as fiscal councils in shaping fiscal relations; the inter-ministerial organisation of fiscal decision making; and other framework conditions shaping intergovernmental fiscal relations and fiscal policy. This book brings together academics and practitioners dealing with or being involved in shaping the institutions of intergovernmental fiscal relations. It has an interdisciplinary focus and provides insight from various academic or practitioners’ fields: economists, political scientists, budget management specialists and others.



Executive summary

The recent economic and financial crisis has put a heavy strain on the public finances in many countries. It has also put intergovernmental relations and sub-central governments’ (SCGs) finances under intense pressure. Rapidly shrinking revenues and rising spending responsibilities – partly as a consequence of stimulus programmes – prompted SCG deficits to rise to levels rarely seen before, although central government transfers often protected SCGs from falling into the fiscal abyss. When the stimulus packages ended, SCGs had to bear their share in general governments’ consolidation effort, focusing on spending cuts since tax revenues recovered only slowly and intergovernmental transfers were often frozen. Although consolidation is still ongoing, SCG deficits have returned to pre-crisis levels and debt is stabilising.


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