Friday, January 28, 2011

Federalism Italian style

Fiscal federalism is one of the core issues of the now wobbling Berlusconi government. Umberto Bossi, the leader of the Northern League (LN), made it the key issue in his support for Berlusconi in both the September and December votes of confidence. He also said last month that if the first of the enabling laws was not passed by 28 January, he would insist on early elections. That was a paper threat; the decrees are not going to pass today and there will not be an immediate call for early elections at least not today. But if there are elections the issue will play a huge role in the campaign.
Gianfranco Fini and his new party Futuro e Libertà and the opposition Democratic Party accept the general principle of some sort of federalism or devolution but draw the line at reducing economic support for the poorer south. Fini’s original split with Berlusconi in April last year was largely because he felt Bossi was leading the dance and Berlusconi was following. The centre left opposition also supports some of the principles of fiscal federalism but does not want to lose its electoral support in the south. The whole issue is another version of the differences between north and south, the Southern Question which has dogged Italy since unification. One commentator, Luca Ricolfi argues that the real divide in Italy is not left-right but north-south.
The problem today is that the fiscal federalism bill was passed in May 2009, but very few people even in government actually know exactly what the phrase means. More importantly, they don’t know how much it will cost and to whom. All the leaders of the Northern League have made it very clear that their support for the government is conditional on the implementation of fiscal federalism. It was listed as one of the five issues in last September’s vote of confidence but is still far from being a reality. The discussion this week is on what sort of tax and spending powers the local councils should have.
This plan does not aim to make Italy a genuinely federal state nor does it pretend to. Actually, the centre-left made Italy “federal” just before they left office in 2001 with a constitutional amendment confirmed in a referendum. It changed Chapter V of the constitution and gave more power to the 20 regions but it was never implemented. In practice, Italy is still one of the more centralised states in Europe and there has been next to no debate on what “federalism” actually means.
Put very crudely, a federal state is one where the constitution explicitly gives certain powers to central government and others to the lower or meso-levels. Some constitutions define the centre’s powers and leave the rest to the meso-level. Others do the opposite and others again are precise in their distribution. In the American case, the states have responsibility for most of the civil and criminal laws and their application and they have complete fiscal independence. Washington does not bail out an improvident Sacramento (nor does Albany bail out New York City); Massachusetts residents are painfully aware of how much they pay to keep their state going while Nevada residents are happily supported by the out of state gamblers who pay most of their taxes. Germans and Swiss too are very conscious of the different taxes and service from one canton or Land to another or from one city to another. In Italy, in contrast the responsibilities of the different levels are far from clear. The Naples rubbish crisis for the last three years has been an object lesson in buckpassing between national, regional and city governments.
Italian fiscal federalism is just that – fiscal and the legislation being discussed now is just for cities or comuni, not even the regions. Laws and law enforcement agencies will stay Italian. Some property will be transferred to regional and city governments and some already has. There are curious spats like the one between the city of Florence and the Ministry of Fine Arts over who owns Michelangelo’s David. Betta Povoledo described the serious and frivolous aspects of ownership of cultural heritage. The Mayor of Florence is adamant that it belongs to the city. The ministry argues that since it was commissioned for the Grand Duke of Tuscany, title has passed to Italy as the successor state. The Accademia is a state museum and David is the principal attraction; all income goes to the state. In another argument after last month’s snow, the Tuscan regional government wanted to fine the State Railways €1.3m for delays due to their incapability of dealing with bad weather. We can expect a lot more spats like these ones.
Spending will be proportional to taxes received which means that the north will get more and the south less. According to Il Sole 24 ore, a study published by IFEL for the national association of local authorities (ANCI) calculates that there will be a €2.5bn overall drop in income for the comuni or local government after last year’s cuts. The government calculated that a lower flat rate for tax on rent (payable to the comuni) would make up the shortfall but ANCI reckons the calculation is over-optimistic.
There are some elements of the reform which almost everyone agrees on – health services (managed by the regions) should cost the same to the regional provider throughout the country. At the moment the same service (clinical analyses, operations &c.) can be accounted for at vastly different prices in Sicily, Tuscany or Lombardy, with the price usually being more in the south.
But as the economist Mario Deaglio pointed out this week, not all local governments are actually capable of delivering the necessary services at the moment. Everyone loves the idea of federalism but the reality is very different, especially for the poorer or less efficient comuni or regions. And the French and Piedmontese centralisation is so deeply ingrained in Italian political thinking and practice that the centre always wants to keep tabs on what the periphery is doing.
The result is that even if Bossi manages to get some degree of fiscal autonomy for the north, it will be a small part of regional and local government business. And as the costs become clearer, the opposition mounts. The Northern League started its fight for fiscal autonomy in 1994; they risk having to wait another 17 year and still have little to show for the campaign. The immediate result is an even weaker government.

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