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Prepared by Teresa Daban.
In the early 1990s Italy began a gradual decentralization process from a situation in which sub-national governments’ revenues consisted basically of conditional transfers from the central government, to a situation in which most of the sub-national revenues are own or shared taxes. Before the ISP, the limits on sub-national governments’ borrowing were set by a “golden rule” with an indirect ceiling (debt service could not exceed 25 percent of own revenues). Frequently, however there was unlimited year-end coverage of deficits (in the health and transport sectors, for instance) by the central government.
This public institution is devoted to finance subnational governments. This incentive was undermined by the recent decision to grant all regions an unconditional reduction in the interest rate.
The High Council of Finance is composed of representatives of the ministry of finance, regional governments, central bank and economic experts.