While the Central Government is responsible for the European Stability and Growth Pact, internal coordination among different layers of government is crucial to comply with the European obligation. In this paper the Italian Domestic Stability Pact (DSP) on local authorities is evaluated in terms of its effects on the public sector borrowing requirement from 1999 to 2005. A new data base is used to verify yearly and for each local authority the respect of the Italian DSP. More precisely, the fiscal rule is calculated on official budget data for the whole sample of local authorities tied. The results supply evidence for reconsidering the structure of the DSP in terms of binding fiscal rule, adjustment of structural local budget deficits and international compliance.
Jel Code: H71