Derivative financial instruments and budgetary balances: the case of Italian public administration

The present paper aims to examine whether derivative contracts concluded by the Public Administration enable to assess the real financial commitment on the authority’s budget, due to their intrinsic features and the current legal framework. The author claims that, on the whole, they cannot be easily reconciled with the obligation to ensure balanced budgets and public debt sustainability, as provided for by the reformed Articles 81 and 97 of the Italian Constitution. Therefore, it is to be hoped that there be an intervention by the legislator to regulate the use of these financial contracts by all public authorities, as well as companies with public shareholding. In the author’s opinion, there are two possible regulatory options: either to introduce a ban on these innovative financial instruments for any public body, or to accurately regulate this issue, by ensuring the disclosure of necessary information to render derivatives thoroughly compatible with the constitutional principles aimed at protecting the stability of public finances.