The vertical fiscal institutions that structure the relationship between central and sub-national governments greatly influence the performance of government, particularly the way publicly provided goods and services are offered. The observation of the intergovernmental fiscal systems shows that the allocation of expenditures is always greater than the allocation of tax authorities. A neglected question is how the sub-national governments are dependent on the central grants. In the last decades the tendency is quite clear in Western Europe. There is a change towards systems that are progressively more dependent on central grants. The authority over public policy has tended to be more financed by central governments. This is so even for the countries that have had a clear trend of decentralization of authority. This paper addresses this evolution of local government financing systems as a case of institutional change through the empirical analysis of the 12 European Union over the period of 1961-1995. The results show that revenue-sharing institutions was promoted by left-leaning governments and that public debt is a major concern with regard to those decisions. 
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