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The Role of Budgetary Rules in Multi-Level Governments

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Financial Sustainability of Public Sector Entities

Part of the book series: Public Sector Financial Management ((PUSEFIMA))

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Abstract

In the last decade, especially after the fiscal crisis, policymakers at the supranational and national levels have increased their concern regarding the financial sustainability of public finances and have tightened the control of government deficits by setting permanent financial constraints on government budgets—that is, budgetary rules. The use of budgetary rules in government has been mainly investigated through the lens of public finance and economic theory, while the accounting perspective seems to have been quite neglected. Accounting rules and procedures are critical for the effective functioning of budgetary rules, as they define what has to be measured and lay out a framework for assessing progress and achievement. This chapter aims to start filling this gap by shedding light on the role of budgetary rules in ensuring the financial sustainability of public entities in the context of a multi-level government system.

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Notes

  1. 1.

    Available at http://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/fiscal-governance-eu-member-states/numerical-fiscal-rules-eu-member-countries_en. We did not consider the Czech Republic since, in the last update of the EU dataset of budgetary rules (2018), data about this country had not been reported. This may be due to the Czech Republic not ratifying the fiscal compact reform of the EU Treaty (2012), which has been in force since January 2016.

  2. 2.

    Debt service is included in the balanced budget rule with regard to regional and local governments in Portugal (refer to Table 4.1).

  3. 3.

    From 1999 to 2006, there has also been a ceiling on the nominal expenditure growth rate of regional and local governments.

  4. 4.

    Belgium, Bulgaria, Germany, Denmark, Estonia, Finland, France, Lithuania, Luxemburg, Poland, Portugal, Romania, Sweden, Slovakia.

  5. 5.

    Ireland, Italy, Lithuania, The Netherlands, Cyprus.

  6. 6.

    Conversely, it should be acknowledged that the exclusion of investment expenditures from the budget balance could bias the government in favour of forms of capital spending whose long-term benefits are much smaller than the benefits from some forms of current spending (e.g., education). We thank an anonymous reviewer for raising this issue.

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Authors and Affiliations

  1. Department of Business and Law, University of Milano-Bicocca, Milan, Italy

    Enrico Guarini

  2. Department of Communication and Economics, University of Modena and Reggio Emilia, Reggio Emilia, Italy

    Anna Francesca Pattaro

Authors
  1. Enrico Guarini
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  2. Anna Francesca Pattaro
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Corresponding author

Correspondence to Anna Francesca Pattaro .

Editor information

Editors and Affiliations

  1. Department of Accountancy, University of Malta, Msida, Malta

    Josette Caruana

  2. Department of Accounting and Finance, University of Zaragoza, Zaragoza, Spain

    Isabel Brusca

  3. Department of Economics “Marco Biagi”, University of Modena and Reggio Emilia, Modena, Italy

    Eugenio Caperchione

  4. Department of Business Administration, Athens University of Economics and Business, Athens, Greece

    Sandra Cohen

  5. Department of Management and Innovation Systems, University of Salerno, Fisciano, Italy

    Francesca Manes Rossi

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Guarini, E., Pattaro, A.F. (2019). The Role of Budgetary Rules in Multi-Level Governments. In: Caruana, J., Brusca, I., Caperchione, E., Cohen, S., Manes Rossi, F. (eds) Financial Sustainability of Public Sector Entities. Public Sector Financial Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-06037-4_4

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