Analysis of the Legal Proposals for New Subnational Finance Laws

This report provides an economic analysis of the bills on local finances (PPL 122/XII/2. ª) and regional finances (PPL 121/XII) that the Government submitted to the Parliament’s appreciation. It complements Report n. 2/2012, from September, which suggested a set of principles to be considered for bill building. The analysis focuses on the behavioural incentives of local, regional and central governments regarding the sustainability of public finances.

Presents the main features of the proposed subnational frameworks, and in a constructive perspective, identifies a number of problems in the two bills and suggests improvements. A companion paper, published also in April 2013 by the Portuguese Public Finance Council, resorts to backward numerical simulation exercises to assess the impact of the debt limits in bills PPL 121 and 122 on the gross debt of the Portuguese general government.

Date of last update: 23/04/2013