The “Golden Rule” as a New Financial Management Tool for Local Governments
The “Golden Rule” as a New Financial Management Tool for Local Governments

Summary/Abstract: The implementation of the so-called “golden rule” regarding the fiscal managementof the sub-sector of the local-self-government (LSG) constituted a reaction to thegrowth of the debt within the sector of public finances and an attempt to curb the LSGdeficit. In this manner the Legislator wanted to balance the budget regarding operating revenuesand the operating expenditures and to allow for the use of public loans, thus permittingthe generation of the debt only in regard to capital expenditures. The authors of thearticle evaluate the validity of introducing the new regulations, subjecting the “golden rule”to a positive critique and forming requirements for changes and improvements based onsolutions to this problem utilized in other countries. An empiric data is presented that showsthe consequences of overloading the LSG with the effects of the growing level of public debtin a situation when the responsibility for the majority of the debt (more than 90%) restswith the public governance at the government level. The authors also put forth the thesisthat the implementation of the more restrictive rules on the central level is also necessary tooptimize the entire system of public finances.

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