Sub-national Finances and Fiscal Consolidation [E-Book]: Walking on Thin Ice / Camila Vammalle and Claudia Hulbert
Vammalle, Camila.
Hulbert, Claudia.
Paris : OECD Publishing, 2013
50 p. ; 21 x 29.7cm.
englisch
10.1787/5k49m8cqkcf3-en
OECD Regional Development Working Papers ; 2013/02
Urban, Rural and Regional Development
Taxation
Governance
Finance and Investment
Full Text
Recent crises and national consolidation packages affected sub-national finances. In many OECD countries, central governments introduced reductions in transfers to sub-national governments, and established expenditure and/or deficit objectives to be met by local or regional authorities. Such measures have reduced the financial room of sub-national governments for implementing key public services or investments. In parallel, borrowing conditions deteriorated for many sub-national governments, as banks and financial markets became increasingly reluctant to lend. Since late 2008, financial markets started discriminating between high- and low-quality SNG bonds, and yields reached record-high levels for sub-national governments perceived as less creditworthy. Facing degraded finances, upward pressure on expenditures and deteriorated borrowing conditions, many sub-national governments have used public investment as an adjustment variable to reduce their budget deficits and preserve their spending on welfare, health or education. However, such policies may hinder long-term growth perspectives.