The Impact of Fiscal Rules on the Financial Management of Municipalities: A Comparative Analysis of Slovakia and the Czech Republic

Authors

NEMEC Juraj KLIMOVSKÝ Daniel ŠAGÁT Vladimír PLAČEK Michal SEDMIHRADSKÁ Lucie

Year of publication 2021
Type Chapter of a book
MU Faculty or unit

Faculty of Economics and Administration

Citation
Attached files
Description The goal of this chapter is to explore the impact of fiscal rules on the indeptness of municipalities in the Czech Republic and in Slovakia from comparative point of view - how far both countries differ or follow similar developments. The focus was on three questions – the contents of fiscal rules, the capacity of fiscal rules to regulate the total absolute and relative level of debt and the capacity of fiscal rules to regulate individual (excessive) debts. The findings indicate that municipal fiscal rules in Slovakia are slightly more comprehensive compared to the Czech Republic, but the differences in the ways how the absolute level of the municipal debt is regulated are very marginal. However, the number of municipalities with excessive debt level in the Czech Republic is significantly higher compared to Slovakia. The problem for both countries is the fact that the excessive borrowing is legally prohibited, but exists in some cases in reality. Excessive borrowing is exclusively connected with small municipalities, with very limited chance to escape from debt trap, because the instruments of bailout and bankruptcy are not part of valid legislation and cannot be used as solution in both countries.

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