Causes and Effects
Studies in Fiscal Federalism and State-local Finance series
Edited by Ehtisham Ahmad, Massimo Bordignon and Giorgio Brosio
Chapter 5: French sub-national public finances: on the difficulty of being a decentralized unitary state
Two facts can hardly be missed when studying French public finances. Firstly, the country has one of the highest reported ratios of general government public spending to GDP (57.1 per cent in 2013 according to INSEE – the French National Institute for Statistics, second only to Denmark among OECD countries); a high public-sector deficit (4.3 per cent of GDP in 2013 and probably slightly more in 2014), and a rapidly increasing national debt that could reach 100 per cent of GDP in the coming years. Secondly, France has followed a systematic policy of decentralization for the past 30 years, the first law for decentralization dating back to 1982. This chapter looks into a potential link of causality between those two observations, focusing more specifically on the impact of the recent crisis on the budgets of the various layers of government. Indeed the crisis provides us with a good test for assessing the quality of our institutions. Did the decentralization, as it is designed and operated in France, soften the impact of the crisis? Or did it make things worse due to, for instance, the inability of sub-national governments to control their expenditures? Did the crisis lead to a rolling back of decentralization, making the various levels of government less accountable, or did it, on the contrary, help improve the French model of decentralization?
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