Fiscal challenges in multilayered unions: An overview and case study

This paper reviews recent research dealing with fiscal discipline and revisit the issues of fiscal control in federal systems, focusing on selective case studies covering the 2000s, before and after the global financial crisis (GFC). We start by contrasting the recent fiscal history of California to that of Greece, illustrating the different ways of dealing with fiscal deficiencies in a mature union, U.S., versus a young union, Eurozone. We continue with an overview of the fiscal developments in Brazil, illustrating the challenges facing federal systems in emerging markets, and possible ways to move forward in upgrading a country's fiscal institutions. We conclude with the fiscal history of Iceland before and after the financial crisis-a standalone small country, assessed favorably by rating agencies prior to the GFC, and now recovering from a deep financial crisis.