Navigating fiscal federalism reforms: the unsuccessful cases of Italy and Spain

Abstract

Objectives: This paper investigates different reforms of fiscal federalism in Italy and Spain, to assess their successful or unsuccessful nature by using a comparative framework across four dimensions: programmatic success, process success, endurance success, and political success. The objective is to evaluate how these reforms addressed inter-regional disparities and institutional challenges in two politically diverse and fragmented systems. Methodology: The analysis follows a structured approach, examining each reform’s goals, implementation processes, longevity, and political outcomes. For Italy, the focus is on the shift from a state-transfer-based system to a tax-revenue-based model with standardizing equalization transfers, while Spain’s case emphasizes the creation of mechanisms such as the Basic Public Services Guarantee Fund to enhance territorial equity. Results: The article shows that both reforms fell short of achieving their objectives. Italy’s reform remains largely unimplemented, hindered by procedural complexities, economic crises, and a lack of political commitment, leading to a regression in decentralization and worsening territorial disparities. In Spain, despite partial progress in equalizing public service provision, political polarization and overlapping mechanisms diluted the reform’s impact, while regional conflicts, notably Catalonia’s demands, have further destabilized the model. Conclusions: The study concludes that achieving successful territorial reforms requires inclusive and transparent approaches that balance regional autonomy with national solidarity, emphasizing the need for durable political coalitions and trust-building among stakeholders.