Local Government Borrowing in Europe – Lessons for Croatia

Abstract

The paper surveys models of local public borrowing across Europe. It begins by discussing some theoretical issues on local deficit financing. Positive and negative sides of local public borrowing are analysed. Legal framework for local borrowing in EU members and the relation between the sub-national government fiscal discipline and rigidity of constraints on borrowing is also examined. At the end, Croatian model of local borrowing is presented. Some lessons are drawn from experience of EU countries. Finally, according to theoretical and empirical finding, some proposals for improving the Croatian model of sub-national borrowing are stipulated.