Informations and abstract
Keywords: Sovereign Debt Sustainability; State and Local Budget; State and Local Expenditure; Inter-jurisdictional Differentials and their Effects; State and Local Borrowing.
This paper deals with two main issues: debt sustainability, meant as specifically proposed in this paper, and the effects of debt decumulation for various territorial communities, in particular for the weak areas of Italy (the Mezzogiorno). The sustainability refers to the effects of governmental financial situation on the growth rate of available resources devoted to consumption and investment. The proposed exercise aims at showing some possible outcomes of the economic and financial crisis that is taking place. Actually, the hypotheses suggested do not lead to a prevision, but to a prediction, that is a sort of prophecy deduced from a very limited set of data. Four hypotheses, concerning constraints of various kinds regulating the variation over time of the debt amount, are proposed: firstly, the zero debt (or constant debt) hypothesis; secondly, the case of GDP-debt ratio invariance; thirdly, the hypothesis of a ceiling on public debt and, lastly, the case of a programmed path of public debt reduction, such as the fiscal compact. The above-mentioned exercise consists in calculating, using data collected in 2011, the rate of change in income of the areas considered (the Country as a whole, the Southern Italy, excluding the islands) for the years from 2013 to 2015. In the best case proposed (that is the zero debt hypothesis), the results prefigure a prognosis of stagnation in the economy of our Country, which is more serious for the businesses and the families of the Mezzogiorno than in the rest of Italy. The other three cases, instead, prefigure a situation of decline, which is more serious for the last proposed scenario, i.e. in the case of a programmed path of debt decumulation. In the Authors' view, it has to be considered that, in Europe, the situation of the Italian Republic is similar to that of a local government. Therefore, when a debt is assumed, a path of debt repayment, which should be financed on the current budget, should be defined in the coming years.