Italian Municipalities and the Fiscal Crisis: Four Strategies for Muddling Through

• Author: Ileana Steccolini,Carmela Barbera,Enrico Guarini
• Date: 01 August 2016
• DOI: http://doi.org/10.1111/faam.12088
• Published date: 01 August 2016

Financial Accountability & Management, 32(3), August 2016, 0267-4424

Italian Municipalities and the Fiscal

Crisis: Four Strategies for Muddling

Through

CARMELA BARBERA,ENRICO GUARINI AND ILEANA STECCOLINI∗

Abstract: Through a multiple case study of eight Italian municipalities, our paper

identifies the main shocks perceived by the local management as a consequence of

the recent fiscal crisis and the related organizational responses. The analysis roots

current responses in longer-term municipal financial management and strategies.

Even in a context where the shocks are described and identified as being much the

same, there is not a single pattern of response, but (at least) four different ways of

reacting to shocks can be identified: reorientation, buffering, continuous adjustment,

avoiding problems and catching opportunities.

Keywords: financial management, fiscal crisis, austerity, municipality, financial

strategy

INTRODUCTION

Governments (and, more generally, organizations and economic systems) have

always had to cope with crises and decline (Peters, 2011; and Boin and Van

Eeten, 2013), yet it is surprising to notice that the latter are often described as

exceptional (Dunsire and Hood, 1989; and Raudla et al., 2013). Indeed, some

authors propose that scholars should adopt a life-cycle view of organizations,

accommodating periods of growth and others of decline (Bozeman, 2010; and

∗The authors are listed in alphabetical order. They are respectively from Universit`

a Cattolica

di Milano and SDA Bocconi School of Management; University of Milano-Bicocca and

SDA Bocconi School of Management; and Bocconi University and SDA Bocconi School of

Management. They wish to acknowledge the financial support of the Public Administration

Division, SDA Bocconi School of Management and to thank Martin Jones, Giorgios Kominis,

Irvine Lapsley, Pete Murphy, Iris Saliterer, the other participants to the IRSPM conference in

Prague and the CIGAR conference in Birmingham, as well as the two anonymous reviewers

for their constructive and insightful comments on the first drafts of the paper.

Address for correspondence: Ileana Steccolini, Associate Professor, Department of Policy

Analysis and Public Management, Bocconi University, Via Roentgen 1, Milan 20139, Italy.

e-mail: ileana.steccolini@sdabocconi.it

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336 BARBERA, GUARINI AND STECCOLINI

Pandey, 2010), whereas others point out that the rhetoric on crises may become

part of wider discourses and agenda-setting behaviours aimed at legitimizing

either a widening of public intervention or, on the contrary, cutback measures

aimed at reducing it (Peters, 2011).

The recent global crisis has attracted significant media and scholarly

attention. Extant studies show that up to now governmental responses to the

crisis have been diverse. Among the countries that have been struck by the crisis,

Italy is particularly affected by a high debt/GDP ratio (about 130% as at 2014),

which threatens the overall sustainability of public expenditure and services.

Within the Italian public sector, Italian municipalities have been particularly

stricken by the economic crisis, that, on the one hand, has reduced their tax

base, and, on the other, has increased the demand for welfare services.

This paper, through a multiple case study analysis based on eight Italian

municipalities, explores the main shocks perceived by local management and

the related financial strategies adopted in response. Previous literature on

cutback management (Levine, 1978, 1979, 1980 and 1985) tends to provide

classifications and descriptions of reactions, often leaving the organizational

conditions, capacities and history, that may affect such reactions, in the

background. Conversely, our contribution sheds light on how responses to shocks

are rooted in past strategies and organizational conditions and capacities. More

specifically, our findings show that, even in a context where the shocks are

described and identified as being much the same, there is not a single approach,

but (at least) four different municipal strategies for responding to shocks can

be identified.

The paper is structured as follows. The next section briefly reviews relevant

literature. The third section describes the Italian setting. The fourth section

discusses the effects of the crisis in Italy. The fifth section presents the methods

of the analysis. The sixth section discusses the main shocks perceived by the

analysed municipalities and the seventh section presents their approaches and

responses to such shocks. The final section discusses the results and draws

conclusions and implications for practice and research.

COPING WITH CRISES: BACK TO THE FUTURE (OR FORWARD TO THE PAST)?

The recent global crisis has increasingly attracted scholarly attention (for

example, Pollitt, 2010; Peters, 2011; Peters et al., 2011; Kickert 2012; Lodge

and Hood, 2012; and Raudla et al., 2013).

Though extant studies show that up to now governments have responded

differently to the various crises (Pollitt, 2010; Peters, 2011; Peters et al., 2011;

Kickert 2012; and Lodge and Hood, 2012), one of the predominant discourses

surrounding them has referred to austerity and cutback management (Kickert,

2012; Posner and Bl¨

ondal, 2012; and Raudla et al., 2013). Indeed, cutback

management literature, fashionable in the late Seventies (Levine, 1978, 1979 and

1980), seems to appeal today to many scholars, practitioners and policymakers

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