DR. ALICE VALDESALICI: Alice Valdesalici, PhD, is Research Group Leader and Senior Researcher at the Institute for Comparative Federalism of Eurac Research. She has been visiting scholar at the Instituts d’Estudis Autonòmics in Barcelona and at the Deutsche Forschungsinstitut für öffentliche Verwaltung in Speyer. She earned her PhD in Italian and European Constitutional Law from the Graduate School of Law of the University of Verona in May 2016. For her research, she received the ‘Ronald Watts Young Researcher Award 2016’, by the IACFS-International Association of Centres for Federal Studies, and the ‘Award for Federal and Regional Studies 2016’, by the Austrian Landtagspräsidentenkonferenz and the Institute for Federalism in Innsbruck'. Her main research interests include comparative fiscal federalism, federal and regional studies, Italian and European constitutional law, institutional innovation. On these topics, she authored several papers in academic journals as well as edited books, and has provided consultancy, among others, to the Council of Europe and to regional and local governments in Italy. In an exclusive interview She answered our questions like the following:

Gulan:  How effective is federalism as a constitutional tool for managing territorial, cultural, and economic diversity, according to your comparative research? Are there specific institutional configurations that, in your opinion, strengthen the resilience of federal systems in asymmetrical and plural societies?

DR. ALICE VALDESALICI: Diversity is the animating rationale of federalism: differentiation and autonomy must coexist with coordination and solidarity. If either “soul” dominates entirely—pure autonomy without solidarity, or pure uniformity without meaningful self-rule—the federal principle starts to evaporate.

At the same time, the effectiveness of federal systems in managing territorial, cultural, and economic diversity varies considerably across cases. Federalism tends to work best when diversity is territorially-grounded, meaning that distinct linguistic, cultural, or national communities are geographically concentrated, and when the Constitution explicitly recognizes and protects diversity as a legitimate component of the political system, rather than treating it as a threat to state integrity.

However, even under these conditions, federalism does not automatically reduce secessionist claims. Offering meaningful self‑government—protected through constitutionally entrenched competences—while also ensuring effective mechanisms for coordination has a stabilizing effect. This stabilizing capacity is particularly strong when conflicts related to diversity can be channeled through jurisdictional or intergovernmental processes and institutions, providing structured arenas for negotiation, compromise, and dispute resolution. These arrangements enhance both the legitimacy and resilience of the federal order.

The core challenge is that the fair balance between autonomy and coordination is context-specific, not universal. There is no ‘one-size-fits-all solution’, but each federal system shall find its own equilibrium considering its historical, political, and socio‑economic conditions.

Gulan: The intricate relationship between autonomy and solidarity is highlighted by your comparative fiscal federalism studies. How can federal and quasi-federal systems create fiscal arrangements that maintain territorial equality without jeopardizing subnational self-rule from a comparative constitutional standpoint, particularly in situations when there are significant regional economic disparities?

DR. ALICE VALDESALICI: From a comparative constitutional perspective, the foregoing considerations become particularly acute in financial relations. The success of fiscal arrangements in managing these dynamics—balancing autonomy and solidarity, while ensuring stability over time and keeping conflicts within constitutional boundaries—varies widely across federal systems, especially in contexts of deep economic disparities.

Despite the variety of existing solutions, one decisive factor of success consistently emerges: the role granted to subnational governments in shaping the “rules of the game”.  When subnational governments participate meaningfully in designing the financial constitution, negotiating intergovernmental financial agreements, and managing redistribution mechanisms, acceptance of the system tends to be significantly higher. Contestations do arise, but they are channeled through the institutionalized procedures and remain within constitutional boundaries rather than escalating into extra-constitutional and destabilizing forms. Participation thus functions as a structural safeguard that reinforces both the perceived fairness of fiscal arrangements and the overall resilience of the federal order.

Australia provides a clear illustration. A highly institutionalized intergovernmental structure stabilizes a system characterized by profound vertical and horizontal fiscal imbalances. Financial equalization is largely treated as a technical matter entrusted to the Commonwealth Grants Commission, an independent statutory body advising on the distribution of GST revenues among States and Territories. Crucially, this technocratic body is complemented by intergovernmental fora, in which federal and state executives negotiate financial agreements. Even intense disputes—such as Western Australia’s objections to the equalization formula—are therefore managed within intergovernmental channels rather than escalating into extra-constitutional conflicts.

India, by contrast, highlights the risks of weak territorial participation in financial relations, within a system marked by significant cultural and economic disparities. Despite the key role of the GTS Council, overall intergovernmental institutions provide uneven channels for effective territorial participation, particularly for marginalized minority regions. In this context, contestation has at times spilled beyond constitutional processes, contributing to heightened political tensions.  While conflicts in Assam, Punjab, or Kashmir cannot be reduced to fiscal factors alone, limited involvement in shaping fiscal rules can exacerbate existing grievances and undermine the perceived legitimacy of federal arrangements.

Gulan: You highlight the importance of institutional innovation and intergovernmental coordination in your evaluations of federal systems' decision-making processes. How are traditional constitutional conceptions of federalism reshaped by informal mechanisms like intermunicipal cooperation or negotiated governance, and do they run the risk of eschewing or even reviving democratic accountability?

DR. ALICE VALDESALICI: Institutional innovation and intergovernmental coordination represent two distinct but interconnected dimensions of federalism.

On the one hand, innovation is one of federalism’s classical virtues. By multiplying centers of decision-making and political responsibility, federal systems create space for experimentation. Subnational and local governments can act as laboratories, developing policy solutions tailored to territorial needs. When successful, these solutions may diffuse horizontally to other units or vertically to the federal level. In this sense, federalism strengthens democratic pluralism: autonomy enables elected governments to respond directly to their constituencies and remain accountable for policy outcomes.

On the other hand, the multiplication of autonomous centers inevitably generates coordination problems. Taking financial relations as an example, federal systems must preserve national cohesion, address fiscal imbalances, and correct negative externalities. To do so, they develop dense mechanisms of negotiated governance. It is primarily at this level that tensions with democratic accountability emerge.

In practice financial relations in federal systems are increasingly shaped within executive-dominated intergovernmental arenas. Fiscal equalization schemes, revenue-sharing arrangements, and budgetary constraints are often the product of negotiations among governments rather than deliberation within representative assemblies. The technical complexity of public finance reinforces this dynamic, by shifting decision-making toward executive actors and specialized administrations.

Canada illustrates this dynamic clearly. Although equalization is constitutionally recognized, its operational design is governed by federal legislation and shaped through federal–provincial diplomacy. Provincial executives participate in consultations, but the federal government retains authority to amend or extend the scheme unilaterally. Parliamentary involvement—at both federal and provincial levels—is largely confined to formal approval of decisions already negotiated. The process is mainly informal and opaque, limiting opportunities for democratic scrutiny.

This pattern is not unique to Canada. Comparative experience shows that in most federal systems—such as Australia, Germany, and Spain—intergovernmental financial relations concentrate power in executive bodies. Even where formal institutions exist, they function primarily as arenas of executive coordination. Legislative assemblies often ratify agreements ex post, with limited capacity to reshape their substance. Financial legislation thus becomes the legal transposition of executive bargains.

Theoretically, this reflects a structural tension within federalism. While federalism enhances democracy through self-rule at the territorial level, its shared-rule dimension—where coordination among governments occurs—tends to privilege executives. Once decisions transcend a single jurisdiction and enter the intergovernmental arena, the logic of efficiency and coordination often displaces the logic of representation.

Yet negotiated governance is not inherently incompatible with democracy. In complex and interdependent systems—especially under conditions of economic crisis or fiscal constraint—effective governance requires continuous interaction among levels of government. Intergovernmental fora are indispensable for maintaining stability and policy coherence. In parliamentary systems in particular, this dynamic naturally strengthens the executive.

The core issue, therefore, is not whether negotiated governance should exist, but how it can be reconciled with democratic accountability. The main risk lies in opacity: negotiations conducted behind closed doors, political agreements embedded in technical legislation, and parliaments reduced to ratification roles weaken democratic oversight.

If negotiated governance is an inevitable feature of contemporary federalism, the challenge is to make it more transparent and subject to meaningful scrutiny. Only by reinforcing accountability mechanisms can executive federalism evolve into a form of responsible federal governance that preserves both functionality and democratic legitimacy.

Gulan: Your research on fiscal federalism draws attention to both its advantages and disadvantages. What are the main advantages of fiscal decentralization in terms of improving accountability and policy responsiveness, in your opinion, and where does it most obviously run the risk of escalating inequality or eroding national unity?

DR. ALICE VALDESALICI: Fiscal decentralization presents a structural paradox. On the one hand, tax autonomy is an essential component of political autonomy. On the other hand, the power to tax in contemporary federal systems—shaped by globalization, mobile tax bases, and redistributive imperatives—makes fiscal decentralization increasingly complex. The situation of federal systems within the European Union is emblematic in this respect, where supranational constraints further limit subnational tax autonomy. No federal system is fully fiscally decentralized, and even fiscally decentralized federations display a trend toward tax harmonization.

The main advantage of fiscal decentralization lies in accountability. When subnational governments control a meaningful share of their revenues, voters can link taxation to expenditure. By creating what is called ‘fiscal responsibility at the margin’, democratic control is strengthened: governments face political consequences for their fiscal choices and have stronger incentives for efficiency and prudent spending.

In practice, fiscal responsibility in contemporary federations rarely rests on a purely ‘own tax’ scheme. Subnational financing is typically embedded in hybrid arrangements that combine autonomy with harmonization (or uniformity) in the interest of solidarity and coordination. Three recurrent paradigms illustrate this balance.

First, tax-base sharing schemes, such as in Canada, allow both federal and provincial governments to occupy the same tax bases (notably income taxation). Provinces may set rates and define certain structural elements, but tax-collection agreements harmonize the tax bases and limit fragmentation, to the extent that provinces opt to enter into such agreements. A measure of accountability is preserved, while excessive interjurisdictional distortions are avoided. Concurrently, equalization mechanisms mitigate undesired disparities in fiscal capacity.

Second, in Germany, the Länder enjoy very limited tax autonomy but participate as co-legislators through the Bundesrat and approve federal tax laws affecting their revenues. This joint decision-making model prevents unilateral federal imposition and preserves a form of fiscal responsibility, albeit one that dilutes territorial differentiation and self-rule. The Bundesrat in fact operates under the majority principle grounded in a mitigated formula of territorial representation: larger Länder have more votes, though not in strict proportion to population.

Third, in Spain, the Autonomous Communities have tax-varying powers over centrally established taxes (tributos cedidos). They may adjust rates and certain tax parameters—sometimes even aspects of the tax base—thereby co-determining their own financial resources within a largely harmonized national tax framework.

These hybrid models demonstrate that fiscal decentralization does not necessarily entail fiscal fragmentation. Properly designed—through shared tax bases, joint decision-making, or tax-varying powers—it can reconcile accountability with national cohesion.

The risks, however, are significant. If fiscal decentralization fosters intense tax competition or substantial divergence in fiscal capacity, inequalities may widen. Wealthier regions tend to benefit disproportionately from mobile tax bases, while poorer territories risk structural underfunding. Without robust equalization mechanisms, fiscal decentralization can undermine substantive equality and strain national solidarity. Conversely, if tax autonomy is too limited and subnational resources rely predominantly on federal transfers, responsibility weakens and political blame-shifting becomes systemic.

The challenge, therefore, is to calibrate autonomy and solidarity carefully. Fiscal decentralization enhances accountability and responsiveness when subnational governments can meaningfully influence their revenues and bear the consequences of their decisions. It undermines unity when differentiation is unchecked or when policy responsibility is decoupled from financial power. Contemporary federal systems increasingly manage this tension through carefully balanced hybrid architectures.

Gulan: Federal systems are attacked for their complexity and inefficiency, yet they are frequently commended for their inclusivity. Based on your studies of intergovernmental relations and decision-making processes, when does shared rule become an asset and when does it become a hindrance to efficient governance, especially during times of crisis?

DR. ALICE VALDESALICI: Federal systems are often criticized for being overly complex because authority is divided among multiple levels of government. Decision-making requires coordination, negotiation, and compromise between federal and state governments, and sometimes local authorities. This can make law-making and implementation more time-consuming and procedurally demanding. Yet that same complexity is also the source of federalism’s strength.

The shared-rule dimension—expressed through federal second chambers and, above all, through intergovernmental institutions and relations—becomes an asset when it secures legitimate, representative, and inclusive decision-making. When the different levels are involved in federal decision-making, the compromises embedded in laws and policies are more likely to reflect the diversity of territorial interests and socio-economic realities. This inclusivity strengthens democratic legitimacy, enhances acceptance of decisions, and fosters trust in the federal system.

The additional time required for consultation and negotiation is not necessarily a sign of inefficiency; it can serve as a safeguard against rash or overly centralized decisions. Faster is not necessarily better. Intergovernmental deliberation, even when demanding, enhances reflection, balance, and the overall quality of policy outcomes. Particularly in pluralistic societies, shared rule operates as a trust-building mechanism by ensuring that territorially distinct governments participate meaningfully in national decision-making.

However, federal complexity can become a hindrance in moments of crisis—such as war, pandemics, or natural disasters—when rapid and coordinated action is essential. Overlapping competences, ambiguous responsibility allocation, or political disagreements between levels of government may delay responses, generate confusion, and exacerbate tensions.

To address this tension, many federal systems provide constitutional or legal emergency mechanisms, allowing for temporary centralization of authority, the activation of executive-driven emergency powers, or fast-track intergovernmental coordination. Such measures must remain limited in time and subject to democratic oversight. Once the emergency phase ends, decision-making should return to ordinary shared-rule mechanisms to restore political accountability, democratic legitimacy, and inclusiveness.

In sum, the shared rule dimension of federal systems is an asset when it enhances inclusive, legitimate, and sustainable decision-making; it becomes a hindrance only when federal arrangements lack mechanisms for timely coordination in emergency situations. The real test of a federal system is not whether it is complex, but whether it can balance efficiency with democratic and territorial participation, especially in times of crisis.

Gulan: How do you evaluate the current governance model of the Italian state in terms of striking a balance between unity, autonomy, and budgetary responsibility, based on your significant research on Italian regionalism, namely the asymmetric design of special regions? Where has differential autonomy led to new kinds of fragmentation or interstate conflict, and how much has it improved effective self-government?

DR. ALICE VALDESALICI: An evaluation of Italy’s current territorial governance model must begin by acknowledging that, although Italy is constitutionally decentralized, it remains highly centralized in practice, both politically and financially. In financial terms, subnational governments continue to depend heavily on central transfers, and the overall system of regional financing—particularly the equalization mechanisms—has remained in a state of uncertainty for over two decades, following a constitutional reform that has never been fully implemented. Budgetary responsibility has slightly improved through the progressive harmonization of public accounting rules, but socio-economic disparities persist, and several regions—as well as local governments—continue to struggle with structural inefficiencies and episodes of financial distress.

With regard to asymmetry, the Italian case shows that differentiated arrangements have not, in themselves, increased fragmentation. The Italian regional system is constitutionally divided into two categories: ordinary and special regions, the latter enjoying, at least in theory, a higher degree of legislative and financial autonomy. The special regions include both wealthy and structurally weaker territories, and their existence has not altered Italy’s long-standing territorial disparities. The gap in regional economic performance has remained relatively stable over time: the North was significantly wealthier than the South well before the adoption of the 1948 Constitution. Conflicts over regional autonomy do exist—most visibly in episodes such as the Veneto Region independence referendum—but these tensions stem less from asymmetry per se than from persistent structural inequalities that remain largely unresolved.

In other words, asymmetry is not the root of conflict, but the symptom of deeper structural imbalances. The core issue is that wealthier parts of the country have continued to subsidize poorer ones, with little evidence of long-term convergence. Attributing these imbalances to regionalism again risks mistaking the symptom for the cause. The roots of these disparities lie elsewhere: regionalism is neither inherently beneficial nor inherently detrimental to economic performance; it is simply one governance tool among others.

What has proven more problematic is the limited federal culture, uneven administrative capacity, and, in certain regions and local governments, the degree of corruption and weak institutional performance. More than the design of autonomy itself, these factors explain both the limited effectiveness of self-government and the tensions that periodically resurface.

Italy also offers cautionary examples. There have been repeated instances of extraordinary central government intervention, particularly in the healthcare systems of certain regions—mainly in the South—that accumulated significant debt.

Similar dynamics affect local governments, mainly due to political instability (64% of cases between 2010–2020), fiscal distress (6.90%), corruption, and organized crime infiltration (2.90%). These episodes illustrate how insufficient administrative capacity and weak fiscal discipline can undermine autonomy from within, prompting central intervention to safeguard essential services and restore legal and economic unity. However, because these crises often stem from entrenched structural weaknesses and political fragmentation, central intervention alone has proven insufficient to resolve them: underlying problems frequently persist.

Against this background, fragmentation and conflict arise not from asymmetry itself, but from unresolved structural deficiencies. Priority should therefore be given to strengthening administrative capacity, ensuring transparency in subnational financing, reinforcing financial and political accountability mechanisms, and enhancing the involvement of subnational governments in national decision-making, which currently remains comparatively weak. Without these reforms, financial and political autonomy risk becoming an “empty vessel”.

Gulan: What good and cautionary lessons can the Iraqi federal experience learn from European and comparative federal systems based on your study on comparative fiscal federalism, asymmetrical regionalism, and multi-level decision-making? Specifically, how may fiscal arrangements, intergovernmental cooperation, and institutional architecture be modified to improve national cohesiveness, autonomy, and accountability in a resource-dependent, post-conflict federal state like Iraq?

DR. ALICE VALDESALICI: While I am not sufficiently familiar with the Iraqi case to offer specific recommendations, comparative observation of federal systems shows that there is no universally optimal model of federalism. Rather, each system must develop the institutional configuration that best fits its own history and political and societal dynamics. That said, several elements emerge from my studies on comparative fiscal federalism that tend to strengthen cohesion and resilience in complex, divided, or post-conflict federal systems, and may therefore offer useful reflections for the Iraqi debate.

First, a well-functioning system of intergovernmental relations is essential. Effective coordination and joint decision-making procedures—preferably institutionalized in a transparent manner with clear rules—help manage territorial tensions and coordinate policies, preventing escalation from autonomy claims to secessionist attempts. In federal systems, meaningful subnational participation in shaping federal arrangements, particularly fiscal ones, increases the perceived fairness and legitimacy of the federal equilibrium, thereby reducing the likelihood that conflicts spill outside the constitutional order. Intergovernmental institutions can also work alongside courts in securing effective dispute-resolution mechanisms.

Second, federal systems perform better when they provide institutional tools that allow actors to contest decisions within the constitutional order. Designing institutions for intergovernmental negotiation, judicial review, and conflict management, as well as fiscal oversight, helps maintain flexibility and adaptability over time, while simultaneously functioning as a trust-building and nation-building mechanism. These qualities are especially important in resource-dependent or post-conflict environments, where political and economic conditions may evolve rapidly. Constitutionalizing such channels of contestation enables subnational governments to express disagreements without threatening the integrity of the state.

Third, asymmetry should be seen as a resource rather than a threat. Asymmetry is part of the DNA of federalism: it reflects the diversity that justifies the federal option in the first place. Rather than fearing differentiated, asymmetric arrangements, it is important to recognize that federal systems tend to be more stable when asymmetries are acknowledged, structured, and governed through clear arrangements—ideally constitutionally entrenched and safeguarded. The key is not to eliminate differences, but to manage them in a way that preserves both self-rule and shared-rule dimensions, and thus the overall cohesion and integrity of the state.

Taken together, these elements—intergovernmental cooperation, institutionalized contestation, and carefully managed asymmetry—represent some of the most robust lessons of comparative federalism from a constitutional law perspective. While they cannot be mechanically transplanted from one context to another, they may offer useful guidelines for balancing coordination, autonomy, and accountability in a federal system facing the challenges of diversity, resource dependence, and post-conflict reconstruction.