Explaining the Implementation of the Fiscal Compact in Italy and Spain: A Comparative Analysis

Following the emergence of the European sovereign debt crisis, the Eurozone countries have adopted the Fiscal Compact, aiming to strengthen member countries’ budgetary stability and to improve the coordination of their fiscal policies. While the Fiscal Compact establishes a general golden rule, it allows each country for autonomy in the legislative design of the fiscal rules. This provision is generating differences among countries in the implementation of the fiscal compact at domestic level. This work proposes to study the implementation of the fiscal compact in Italy and Spain, seeking to understand and explain why the two Eurozone countries are adopting different normative designs. Differences in the implementation can contribute to understand the nature of the crisis in the two countries and to assess the fiscal compact as effective instrument of governance.