Fiscal decentralisation in Europe: a review of recent experience

In this paper we review countries' diverse experiences to draw conclusions on the pitfalls and opportunities that are open through decentralisation of governments' fiscal responsibilities to sub-central jurisdictions. We begin by reviewing the theoretical arguments for and against the decentralisation of spending responsibilities. We also provide a cross country comparison of the extent to which spending powers have been devolved in a range of European countries, putting each country's position into a wider context. Second, we review some insights from the theory of fiscal federalism on fiscal autonomy and assess the extent of autonomy at subcentral tiers of government in the same set of countries. We discuss the approaches that have been followed, and a number of the difficulties that particular countries have faced, as the fiscal autonomy of sub-central tiers of government has evolved. Our conclusions are set out in the final section.