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Italian Budgeting Policy Between Punctuations and Incrementalism Alice Cavalieri Full Chapter
Italian Budgeting Policy Between Punctuations and Incrementalism Alice Cavalieri Full Chapter
Italian Budgeting Policy Between Punctuations and Incrementalism Alice Cavalieri Full Chapter
“Alice Cavalieri’s volume is an original piece of empirical research and a great con-
tribution to the understanding of recent political changes in Italy. Indeed, the
volume fills a gap in the study of budgetary politics in a difficult parliamentary
democracy, which has been struggling with controversial issues in the management
of public finance. At the same time, the volume offers a remarkable example of
intensive case study analysis: by following the theoretical perspective of the “com-
parative agendas project”, the author produces an inspiring interpretation of policy
punctuations in a crucial domain.”
—Luca Verzichelli, Professor of Political Science, University of Siena, Italy
Alice Cavalieri
Italian Budgeting
Policy
Between Punctuations and Incrementalism
Alice Cavalieri
Department of Political and Social Sciences
University of Trieste
Trieste, Italy
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To the youth of today. Change is always scary.
May we be able to see the opportunities that come with it.
May we have the courage to build a new future:
Equitable, sustainable, respectful of all humankind.
Names of Italian Political Parties
vii
viii NAMES OF ITALIAN POLITICAL PARTIES
ix
x ACKNOWLEDGEMENT
1 Introduction 1
3 Budgeting
Policy Within the Union: Italy in the European
Context 43
4 Approaching
an Explanation of Longitudinal Change in
the Italian Budget 77
6 To
Change or Not to Change: Governments’ Spending
Intentions151
xi
xii Contents
8 Conclusion199
Appendix A217
Appendix B239
Index257
Abbreviations
xiii
xiv ABBREVIATIONS
xv
xvi List of Figures
Table 3.1 Most relevant changes of the Italian budgetary process and
policy cycles of the Italian budget (1978–2021) 62
Table 3.2 The Italian budgetary process: timeline of domestic and
supranational deadlines of the budgetary process 68
Table 4.1 Hypotheses about the magnitude of yearly budget changes
(Chap. 5) 80
Table 4.2 Hypotheses about the degree of expenditure reallocation
between the budget law(t−1) and the budget bill(t) (Chap. 6) 82
Table 4.3 Hypotheses about the degree of expenditure reallocation
between the budget bill(t) and the budget law(t) (Chap. 7) 84
Table 4.4 Typology for the classification of governments (1992–2021) 91
Table 4.5 Domestic and external factors potentially affecting Italian
budgetary policy (1992–2021) 96
Table 5.1 Summary statistics of percentage changes in the budget bill
and the budget law 129
Table 6.1 OLS regression model 165
Table 7.1 OLS regression model 188
Table A.1 Main aggregates of national accounts in Italy (1980–2021) 218
Table A.2 Dimensions of the index of executive planning 219
Table A.3 Index of executive planning (1992–2021) 220
Table A.4 Dimensions of the index of legislative approval 221
Table A.5 Index of legislative approval (1992–2021) 222
Table A.6 Dimensions of the index of European external constraint 223
Table A.7 Index of European external constraint (1992–2021) 224
Table A.8 Coalitional conflicts and conflicts over the budget by year and
government (1992–2021) 225
Table A.9 Coding schemes of budget functions (1992–2021) 226
xix
xx List of Tables
Table A.10 Summary statistics of the independent and control variables 228
Table A.11 Quantile regression results of the four models (dependent
variable in absolute value) 229
Table A.12 Logistic regression results of the full model 232
Table A.13 Quantile regression results of the four models (dependent
variable in real value) 233
Table A.14 Index of transformativeness (1993–2022) 235
Table A.15 Summary statistics of the index of transformativeness and
percentage change of the total budget 236
Table A.16 OLS regression model (dependent variable: percentage
change of the total budget) 237
Table B.1 Budget changes above 200 per cent and related type of
change (budget law) 241
Table B.2 Budget changes above 200 per cent and related type of
change (budget bill) 248
CHAPTER 1
Introduction
What is well grounded today, even for public opinion, is the awareness
that public budgeting fulfils not simply a priority, but the priority of
national governments. Although it has always constituted a fundamental
aspect for the state and its functioning, presently it appears to have a more
vital role while, at the same time, being extremely complex and difficult to
manage. For a long time after WWII, steady surpluses granted policy-
makers the leeway to spend public money according to their political pref-
erences. The necessity of efficiently reallocating funds among various
portfolios was neither compelling nor strictly required (Wildavsky and
Caiden 2001). Public expenditure continued to rise as a consequence of
past legacies, increasing population, growing demands and the well-known
aversion of politicians towards taxes in proportion to spending (Crozier
et al. 1975; Rose 1990; Rose and Karran 1987). In the past decades, glo-
balisation has connected countries and their economies all around the
world. Sudden shocks occurred from the 1970s onwards, which forced a
number of countries worldwide, as a consequence also of the interconnec-
tion created by the globalised economy, to cope with a considerable con-
traction: public finance began to deal with a sharp braking of economic
growth and governments were exposed to insistent and urgent pressure
for retrenchment. In such a brand-new context of ‘permanent austerity’
(Pierson 1998, 2002), nascent challenges such as demographic changes
(e.g. ageing population, declining birth rate), migration crises and rising
unemployment (OECD 2019) have required countries to adapt to the
external environment and be more attentive in drawing up the budget.
It is particularly from the decades of the financial crises (1970s and
1980s) that the crucial role of public budgeting began to stand out
(Verzichelli 1999). The two decades saw the dramatic explosion of inequal-
ity of wealth distribution both across countries and within developed
countries, which kept on soaring ever since. It has been argued (see Piketty
2014) that, in the United States, the rising inequality has made the finan-
cial system extremely fragile and exposed it to the 2008 financial crisis. In
that year, in a rapidly changing context, where countries are extremely
interlinked, and the national economy and finance are globalised, the tie
that binds world economies was tightened abruptly, and it quickly became
clear that the housing bubble that burst in the United States would also
drag the whole European continent into a huge economic crisis. Since that
1 INTRODUCTION 3
1
Let us consider for instance the COVID-19 pandemic (which started in 2020) and the
subsequent economic downturn, only a decade after the Great Recession (2007–2009) and
a few years after the recovery from the Eurozone crisis (2009–2014); the outbreak of the war
in Ukraine (started in 2022) that is involving the ‘external’ contribution of all Western
democracies meanwhile facing the oil and energy crisis, the consequent food crisis in many
countries around the world, in a context of an increasingly severe climatic crisis. If ‘adversity’
was the key concept of the 1990s (Rosenthal and Kouzmin 1997), these years will probably
be remembered as the crisis decade.
4 A. CAVALIERI
of research, that is, Italy. The story and analysis of the Italian budgetary
policy presented in the book starts and ends in two moments of deep cri-
sis: 1992 and 2021.
The Amato I government brought to conclusion a political system
based on five-party coalition governments, that started during the VII
legislative term (1979–1983) and was responsible for the most drastic
budget retrenchment in Italian republican history up to that moment. On
the so-called black Wednesday (16 September 1992), after a long period
of immobilism before financial stress (Bernardi 1994), the Italian Lira (the
currency used before the Euro) experienced a 7 per cent devaluation com-
pared to the Deutsche Mark and was forced to leave the European
Monetary System (EMS). A severe economic crisis followed, accompanied
by the decomposition of the political system and the risk of being left out
of the single currency just shortly after the Maastricht Treaty had been
signed, in February 1992. The sharp rebalancing that emerged from such
a political phase downsized the domestic political game, allowing the
Prime Minister to demand full control over economic policy (Fedele
1994), with the sole help of the Minister of the Treasury Piero Barucci.
The total independence of the cabinet confined the parliament and the
‘gatekeeping’ role of parties (Cotta and Verzichelli 1996), while Amato,
exploiting the rhetoric of responsibility (Radaelli 2002: 218), was engag-
ing in one of the boldest reforms of Italian public finance ever, one that
remains recognised as a watershed in Italian public budgeting history. This
is the starting point of the story narrated in this book that will help us to
uncover and understand what happened in the Italian budgetary process
and policy from that moment and throughout the last three decades.
Why Italy? From the budget issued by the Amato I government until the
one issued by the Draghi government (the last one analysed in the book) sev-
eral things have changed, both at the domestic and at the supranational
level. Taking a step back and picking up the threads of the discourse about
public debt begun in the first paragraph, we know that the European conti-
nent is the place where countries are always found to be inadequate in solv-
ing the debt crisis (in spite of their giant private estate), making them
increasingly poor (Piketti 2014: 862). Digging deeper into a more micro
level, within the European continent, Italy has long been considered—and
still is—the ‘sick man of Europe’ with which the word decline is always asso-
ciated. Despite being one of three largest economies in the Eurozone, Italy
had the second lowest growth rate among EU countries for the whole
period between the 1990s and 2009, with a massive level of public debt
1 INTRODUCTION 7
(Fratelli d’Italia, FDI)—a radical-right party which was the most voted party at the Italian
2022 elections—and its leader, Giorgia Meloni, who was part of the youth organisation of
Italian Social Movement (Movimento Sociale Italiano, MSI), the main Italian extreme right
party at the time (Ignazi 1998). In October 2022, with the beginning of the XIX legislative
term, Giorgia Meloni became the first woman Prime Minister in Italy; however, the period
analysed in this book had only men serving as Prime Minister and Minister of Finance. This
is the unique reason why, throughout the book, I refer to these roles using the masculine.
3
Already in the 1990s Silvio Berlusconi criticised how Italy had accepted the single cur-
rency ‘in a closed box’ (Berlusconi 2000: 53; cited in Pasquinucci 2016). Similarly, the leader
of the Communist Refoundation Party (Rifondazione Comunista, PRC) asked to start a
discussion about revision of the Maastricht convergence parameters.
1 INTRODUCTION 9
4
It is important to warn the reader who is not familiar with Italian politics that Italy did
not change its Constitution in the passage between the First (1948–1991), Second
(1992–2012) and Third (2013–present) Republic. In fact, these are mainly journalistic terms
used to differentiate the path of the Italian republican history that in many cases scholars
refrain from using as they are inaccurate. In addition, we need to also point out that the main
features of the Third Republic are not yet well-defined and sometimes a little controversial.
However, as their use is widespread, and these periods are also related to important innova-
tions of the budgetary process that are obviously linked to the rearrangement that occurred
during those turning points, I choose to adopt the labels in the book, also helping the
reader’s comprehension.
10 A. CAVALIERI
during eight legislative terms (from XI to XXVIII)5 and the resort to tech-
nocratic governments specifically to address moments of crisis (from the
1992 economic earthquake to the Eurozone crisis and the COVID-19
pandemic); and the integration into the Economic and Monetary Union
(EMU) and the consequences of the development of the European
Economic Governance (EEG)—both of which triggered a domestic
reform process of budgetary procedures and, of course, of economic
parameters. All these shifts happened in an institutional setting character-
ised by a symmetric bicameralism—where the Chamber of Deputies and
the Senate of the Republic fulfil exactly the same tasks—which has long
been blamed for preventing an efficient decision-making process and hin-
dering the government from steering its spending programme. In the end,
from a bird’s-eye view, one may think that so much changed just to allow
things to stay the same. Is this true?
Italy being one of the most important parliamentary democracies in
Europe and a relevant actor within the Union, the analysis of budgetary
policy and long-term changes thereof are extremely relevant to under-
standing and interpreting recent innovations of European parliamentary
democracies more in general, and how these affect the management and
outcomes of the budgetary policy. Ultimately, the book aims to clarify the
meaning of politics in the framework of the budget policy, singling out the
most relevant aspects concerning: (1) the budget as an instrument of the
government to carry out its preferred policies, by modifying the status
quo; in this respect, we can elucidate the incessant struggle between
responsiveness and responsibility, for which the budget policy constitutes
probably the most fertile breeding ground; (2) the budget as an arena
where the different actors involved in multilevel governance exert their
influence on the final spending outcome; on this, we trace the transforma-
tions of regulations at the domestic and supranational levels that frame the
budgetary decision-making process, highlighting the role of the govern-
ment in designing a credible budget plan, of the parliament in assuring the
respect of the norms in order to safeguard the rights of the opposition and
of the EU in determining the policy paradigm Member States’ budget
5
After the polls of 25 September 2022, a new legislative term (XIX) began, with the instal-
ment of a new parliament after a Constitutional reform that saw a reduction from 945 to 600
representatives, and of a new government led by the first woman to become Prime Minister
in Italy (Giorgia Meloni).
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