The Italian parliament has approved a law paving the way for the devolution of fiscal powers to regional governments, in a move that critics warn could add pressure to the country’s fragile public finances.
The controversial legislation was championed by the far-right League party, which is part of Prime Minister Giorgia Meloni’s government coalition, and was approved on Wednesday morning after an all-night parliamentary debate. It sets out the procedure through which regional governments could obtain greater autonomy in spending tax revenues.
While the autonomy plan is intended to be budget-neutral, the Bank of Italy and the European Commission have both warned that more fiscal federalism in Italy could overburden the country’s finances.
“The risk that this process may result in greater burdens on the public budget cannot be overlooked,” Italy’s central bank warned last year.
The European Commission, which on Wednesday admonished Rome for running too high a budget deficit, in the past has also expressed concerns about this reform, which it said “risks jeopardising the government’s ability to steer public spending”.
League leader and deputy premier Matteo Salvini hailed the law as a step towards “a more efficient and a more modern Italy, with less waste and more services for all citizens from north to south”. It marked a rare policy win for his embattled party, which has been eclipsed in recent years by Meloni’s Brothers of Italy.
The League was born in the early 1990s as a regional separatist movement, fuelled by the resentment of business groups in the heavily industrialised north over tax revenues being transferred every year to Rome and less-developed provinces in the south.
Paolo Grimoldi — who represented the League in parliament for 16 years until 2022 — said the law was just the start of a lengthy process. “It’s good news but it is the beginning of a path that could take 10 years to implement,” he told the Financial Times.
Meloni’s party has previously had deep reservations over devolution of fiscal power to the regions. A decade ago, she even called for the abolition of regional governments, saying they increased opportunities for corruption and sinecures, and that power should be returned to Rome.
However, analysts say her party is now supporting regional autonomy in a quid-pro-quo to ensure League support for Meloni’s proposed overhaul of Italy’s anti-fascist constitution. That reform — which would create a directly elected prime minister — passed a first vote in the Senate this week.
Opposition parties have lambasted Meloni’s party for its U-turn on fiscally empowering regions and warned that the policy would exacerbate inequality between Italy’s wealthiest and poorest regions.
Elly Schlein, leader of the opposition Democratic party, described the law as “the old secessionist plan of the League” and said it would “divide the country in two”, leading to “first-class and second-class citizens depending on the region where they are born”.
In a bid to overturn the law, Democratic party leaders said they would attempt to gather the 500,000 signatures necessary to hold a national referendum on it.