Paper/Speech Details of Conference Program for the 20th NISPAcee Annual Conference Program Overview Public Finance Author(s) Sasa Drezgic University of Rijeka Rijeka Croatia Klimovsky Daniel, Uroš Pinterič, School of Advanced Social Studies, Nova Gorica, Slovenia Title Fiscal rules and fiscal sustainability at sub-national government level in EU File Paper files are available only for conference participants, please login first. Presenter Sasa Drezgic Abstract Relationship of fiscal rules and fiscal sustainability is subject to ongoing debate which was intensified by adoption of EU fiscal rules. Task of the fiscal rules is simple – to prevent the unsustainable growth of debt and spending. However, the problem of fiscal rules that have been applied in past is in ignoring the economic fundamentals that determine fiscal sustainability. So far, fiscal rules were focused on the control of spending without taking care about possible output fluctuations or effects of debt financing on growth. That led to paradox that even with the sound fiscal policy guided by the fiscal rules there is no guarantee of fiscal sustainability. This flaw became obvious when countries hit by economic crises start abandoning the criteria set up by fiscal rules in order to confront impact of worsening economic conditions to fiscal variables. Therefore, there is a need for development of new fiscal rules, particularly on the sub-national government levels. The goal of this paper is to try to generalize such rules and to test whether they can be implemented within the specific fiscal decentralization designs in different countries. These new fiscal rules should encompass both short-term and long-term sustainability and particularly stimulus to economic efficiency. In order to determine necessary content of fiscal rules to achieve such goals it is important to conduct comparative research on the issue. The paper compares fiscal rules and their implementation in Slovakia, Slovenia and Croatia. In the first part of the paper, the theoretical foundations of fiscal rules are briefly described. Comparison of key elements of fiscal rules and their effects on local governments in selected three economies is presented in the second part. Third part of the paper, before conclusion, offers policy guidelines for fiscal rules design in general and some specific propositions for each of the countries.
