Abstract
Italy’s system of fiscal federalism and financial relations is comparable to an inverted pendulum that, unlike a normal pendulum that is stable when hanging downwards, is unstable and must be actively balanced to remain upright. For now, it is balanced by applying a torque at the pivot point that is centrally steered, and not by moving the pivot point horizontally as part of a feedback system in which its multiple actors enter dialogue on an equal footing. What is meant by this, and which factors or developments speak for this argument, is the subject of this paper. The paper offers a contextual analysis of the reasons and development of Italy’s unequal regional economies, and it discusses recent turning points regarding the allocation of expenditure responsibilities, taxation powers, and mechanisms of equalization, both in relation to the regional and the local level of government.