Multi-Level State Dynamics and the Economic Crisis in Italy

Italy is facing a severe and prolonged economic crisis, with a “double dip” recession following a decade of negligible economic growth. This has prompted political parties and their leaders to enact a range of institutional reforms designed to improve the performance of the political system and enhance its decision-making capacity. Many of these measures seek to radically alter the relationship between different levels of government.

Since 2008 Italy has introduced a system of “fiscal federalism” to increase the tax-raising powers and financial accountability of regional and local governments; effectively abolished the provincial level of elected government; and reduced fiscal transfers to sub-national governments in order to contain public expenditure and maintain the austerity drive demanded by Eurozone partners and financial markets. In 2014 the Italian Parliament approved the first reading of a profound Constitutional reform, designed to end the gridlocked system of ‘perfect bicameralism’ by weakening the Senate and reinforcing the Lower House and Prime Minister. This reform contains several measures that affect regional and local governments: direct representation in the reformed Senate; a major revision of regional and national competences; and provisions to reinstate the juridical primacy of national legislation.  

Although these reforms were largely implemented due to the economic crisis, they also reflect the electoral/strategic interests of governing and opposition parties, so contain a series of contradictory elements. They confirm the ambiguous nature of the multi-level state in Italy, with its competing centrifugal and centripetal dynamics, and its hesitant shift towards a more federal system.