Last Updated 13 Apr 2020

The Role of Italian Government in Managing their Finance and Economy

Category Finance, government
Essay type Research
Words 2030 (8 pages)
Views 507

There are many insights and studies already conducted with respect to the government system of each nation. Studies were also made to observe how particular governments run the economy of the respective states. Such aspects that include the financial organization of a country, infrastructure programs, foreign policy are some of the most important issues that directly affect the economy of a specific state. Moreover, the form of government is also critical in evaluating the total progress and status of a nation.

There are instances that the form of government has direct relation with how well the economy is being run by the ministers and officials of the concerned nation. Italy has very interesting issues with regards to government policies that is being applied throughout the whole nation. In addition to that, Italy is a nation that has experienced various economic turnabouts that did affect the lives of its citizen. It can also be noticed how the government handled these issues and run the Italian economy.

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One of the interesting facts and issues that are all about Italy is when the government implemented decentralization in running the economy. There are lots of advantages being decentralized in running a government rather than being centralized in the various organization structures and bureaucracy. On the other hand, it would do more harm to the economy of a nation once decentralization is not properly managed. The Italian government had decisions leading to these type of management wherein there would be more power being given to municipalities and provinces in running their respective territories.

Italy once was a country that is centralized and such moves to amend the strategies in running the government will sure have numerous flaws, evidently because the new system is not yet fully absorbed by those that will be affected by such changes. The idea of decentralization came from the pressures being applied by the regions in the national government of Italy that are considered to be wealthy enough to support their own expenditures and services to the electorate.

Such demand to shift the government framework to federalism is being pushed through since the government failed to deliver such service developments adequately to all of its territory. It is also undeniable the influence of these advocates to federalism since the government should have out rightly silenced all of these political pressures. The law that provided the outline for this modified system of government leads the country to various issues and disputes that need to be resolved.

According to the Bassanini law (Piperno, 2000), such shift into federalism will provide a new era of how the government will run the economy of the country with a more balanced approach considering the regions, provinces and municipalities involved. Under this framework, more authoritative powers will be given to regions, provinces and municipalities with regards to the strategies on administering their respective local economy. However, according to the law, the national government can still hold authority on decisions that is of national interests.

Such limitation is provided in the law to oversee the local authorities in administering their official functions. In addition to that, the law has set limits on the powers given to the local government entities such as any provision or ordinances should foster cooperation among local authorities, and promoting full accountability and responsibility in the decisions being made by the concerned local officials. This also includes the autonomy given to local units in collecting and managing taxes for their respective territories.

Such introduction of local monetary collection system and management has further strengthened the power of local officials to collect taxes and dues form their citizens. The table below describes the amount of shares from different government levels. Share of different levels of government on total public sector revenue and expenditure (Piperno, 2000) Central Government Local Government Social Security Agencies Year Revenues Expenses Revenues Expenses Revenues Expenses 1980 59. 1 42. 6 6. 1 27. 1 34. 7 30. 1 1981 59. 7 42. 9 6. 8 30. 4 33. 26. 5 1990 61. 6 47. 4 7. 7 27. 6 30. 6 24. 9 1991 61. 7 47. 0 7. 9 27. 7 30. 3 25. 1 1993 61. 6 50. 1 9. 3 24. 5 29. 0 25. 3 1994 60. 2 47. 7 10. 7 25. 6 29. 0 26. 5 1995 59. 5 48. 6 12. 3 24. 6 28. 1 26. 7 1997 56. 9 40. 6 10. 7 26. 7 32. 3 32. 5 As seen on the table, the local government has increased revenues from the year 1980 up to 1997. This effect was caused by the continuous empowerment of the national government to the local municipalities to collect taxes for their respective regions.

A significant increase of approximately 5% in the revenue collection was observed and the decrease in the revenue collection under the national government was due to the decentralization process that is being pushed by the officials of the Italian government. These numbers are expected to continue its trend as the advocacy for local government empowerment carry on to its full extent. Legislation made this financial decentralization implemented in the whole structure of the taxpayers to be shared with the national government.

The local authorities also ventured to an enhanced system of putting taxes into the petrol industries to improve the tax collection scheme government as stated in their revised revenue distribution law. The local government also made substantial increase on the percentage of taxes being collected to its citizen and the industries to enable them to cover the administration’s expenditures and the budget deficit they have. As a result, many regions in the northern part of Italy made their corresponding local budgets better that before these decentralization measures were implemented.

On the other hand, little effect was observed on the lower classes of municipalities and regions due to the limited resources with respect to the people and industries they have in their regions. Thus, there are still adverse effects as observed in these mentioned low income regions. With regards to the Italian government’s effort to administer the whole country, the laws in the land made it clear about all the interventions and systems in the economy. Knowing the structure of a particular government is essential because this is adds up to the bureaucratic control and distribution of services to the populace.

This would also provide hints on how the economy is greatly affected by this form of government organization. The Italian government structure consists of the central government, regions, provinces and municipalities. In the present system, the national government holds a tough authority to regional governments. One particular example is that the central government still classifies laws and ordinances that the regions should implement even the regions were given powers to formulate their own legislation measures. The national government can reject regional-made laws that they think would not bring good to the entire nation.

There have been conflicts between the central and regional government and when these disputes were brought to the courts, the judicial system always favored the side of the national government. Regional governments were introduced in the Italian government framework only in the 1948 Constitution. (Piperno, 2000). This government entity were provided under the constitution legislative and administrative authorities in the fields of high importance like in agriculture, health sector, tourism industry, transportation departments and other relevant aspects in their respective territories.

There were five regions that were established under the same constitution. Before the fiscal decentralization law, regions do not have autonomy in their taxation system and were supported by the national government in their expenditures. For example, the financial support for the health centers in the region comes from the national treasury only, since they do not have money to finance their own health units. Provinces, on the other hand, possesses only limited duties in the former constitution or before the decentralization take effect.

There are also situations when provinces did not have any substantial role in administering their corresponding municipalities particularly in those big municipalities and the metropolis. For the other municipalities, their control is mostly seen to take effect in terms of governance and support to the little municipalities and through proper management in rural areas. Municipal governments are mainly responsible for the basic services needed by the people such as potable water systems, domestic waste disposal systems, and other usual necessities of its citizens.

With the aid of new legislations, these municipalities were given more powers and privileges such as the rights to vote for their municipal head and the independence in tax collection system. With these new constitutional rights, any municipality can benefit on the taxes it collect and as a result, more funds can be used to spend on the basic services for the populace. On the other hand, the primary weak spot of this approach is that it may create imbalance between rich and poor municipalities since there would be less income for those who have limited collections but with higher expenditures compared to the richer municipalities.

Because of that, each municipality needs to find new strategies to strengthen their fiscal situation to maintain a well balanced budget. The table below shows the distribution of revenues in the municipality level form the specified years covered by the statistics made by the central statistics office in Italy. As shown in the statistics above, municipalities then depends their finance on the central government like in the year 1970 until they were given new tax measures including tax autonomy in the year 1972 but only took its significant mark in the year 1996.

Other aspects of the Italian government’s approach in running the economy reflects on some of the key issues like freedom from foreign interventions, political system, banking systems, transportation sectors, real properties, education, culture and other essential concerns. As a member of the European Union, the Italian government is bounded to follow the laws formulated by the union. However, Italian people will only be prosecuted by the Italian court and the laws of the land, and not on the laws of the union. Italy has more than 2 electoral parties making it more divisive in terms of policies being implemented by the ruling party.

Such scenario made the government very unstable because of disagreements even between the members of the ruling coalition. Such problems were added further by accusations of corruption of the leaders and the increasing foreign debt of the country. The banking system in Italy is also greatly affected by the policies being implemented by the Italian government. The banking sector can also be a gauge to measure the economy of a particular country. With regards to the Italian banking system, it is still stable in terms of being part of the European Union which uses Euro as the currency.

Since Euro currency is very strong compared to the other currencies, this carries the economy of Italy. Another factor is that the government has no control or intervention over the banking system, making it more independent against any influence that government leaders may bring. With all of the bad scenarios in the political system of Italy, the country still provides great attraction for business investors because of its various provisions to make Italy a better choice in the business climate. The Italian government also ventured into privatization of government owned and controlled corporations.

These move by the government provided private firms to own and manage these enterprises and pursue upgrades in the service it gives to the Italian people. The government also has more savings since they do not have to spend public funds to run these corporations. Having said all of these information on how Italian government run their economy, it can be said that the economic growth of Italy depends greatly on the people who are positioned in vital areas of government structures like mayors, governors, legislators and the primary head of the country.

These persons hold sensitive positions that dictate the nation’s policies and direction toward progress and continuous advancement with the rest of the world. Corrupt leaders will only add to the problems the country is facing. Italy needs responsible people who would think first the welfare of the nation before themselves. These dedicated people will surely deliver good output for the continuous progress of their nation, Italy.

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