European Patterns of Local Government Fiscal Regulation.

Abstract

European countries employ heterogeneous and complex systems to regulate local government budgets. Although the topic has become increasingly relevant in the face of past and future economic and budgetary crises, there is a lack of cross-country studies in this field, due in part to the institutional complexity of financial regulatory systems. With the help of extensive case study data processed with quantitative comparative analysis, we conduct a classification study which suggests a new way to analyse the commonalities in fiscal supervision structures, supervision routines and numerical fiscal rules in 21 European countries. In addition, we derive an aggregate index of regulatory strength. This allows us to identify a European north-southeast divide with looser regulatory regimes in the north. Such a pattern fits with existing theories of state traditions and might serve as useful heuristic for future debates about local government fiscal regulation.