Coping with recession and preserving fiscal sustainability.
The effects of the financial and economic crisis and the authorities' response
The recession that has gripped the French economy since the last quarter of 2008 marks the end of a virtually uninterrupted cycle of growth that began in early 2002 (Figure 1.1). While the initial problems sparked by the subprime crisis date back to May 2007, their adverse impact on the real economy did not really make itself felt until about a year later. During the 12 months that preceded the sudden seizing-up of the financial system in September 2008, growth was already losing steam, initially under the combined effect of sharply slowing housing investment and the increasingly negative contribution of external trade (in the second half of 2007), and then under the impact that the commodities price shock had on inflation and on household purchasing power (in the first half of 2008). At the same time, with the slide in stock market indices and the downturn in the housing market, households began to see the value of their equity slide, particularly from early 2008 on. To the slowing of real disposable income was thus added a negative wealth effect, the impact of which on consumption is still hard to measure. In this context, while households were able to dip into their savings, this fell far short of offsetting the inflationary shock-related effect of lost purchasing power, and they preferred to rein in their pace of consumption, even though employment held up well until summer 2008. At the same time, the steady drop in unemployment led to a marked slowing of productivity growth. This in turn was reflected in a faster rise in unit labour costs, thereby exacerbating the competitiveness problems that French firms have faced for several years (see Chapter 3).
While some of these forces were still operating in mid-2008, it was the worsening of the financial crisis in September 2008 that brought about an abrupt fall in activity during the fourth quarter and thus heightened the risk of a deep and prolonged recession. The impact of the financial crisis was surprising not only for its scope but also for the speed at which the economy deteriorated in the fourth quarter. While growth was slightly positive in the third quarter, signs of an abrupt downturn were coming in rapid succession with the collapse of confidence indices, followed by shutdowns in certain industries (the whole automobile industry, in particular), a retreat in corporate investment and fast-swelling unemployment. Moreover, production dropped much more quickly than demand, resulting in a very significant rundown in inventories during the fourth quarter. The speed at which firms adjusted output no doubt reflects cash flow problems and the credit crunch they were facing. Apart from the decline in inventories, the domestic demand components that depressed activity the most in the last quarter of 2008 were business and residential investment. By contrast, household consumption proved much more resilient than expected, growing by near 0.4%. After declining to 7.2% in midyear, unemployment jumped sharply in the fourth quarter, to close the year at 7.8%. In addition, one of the channels that carried the crisis so swiftly to France was the collapse of external trade: exports and imports fell by 3.5% and 2.3% in volume (Q/Q) in the fourth quarter, resulting in a negative net contribution to growth of 0.3 percentage point.
[FIGURE 1 OMITTED]
As in most countries, the economy in France was directly affected by the financial and real estate crises, even if to a lesser extent, by some measures, than in more exposed countries such as the United States, the United Kingdom, Spain, Ireland and Iceland. The financial crisis had overall the same short-term effects as elsewhere: temporary suspension of the interbank market, drying up of the securities market and severe jolts to the credit market. Faced with a crisis of confidence that was paralysing the financial system and threatening the survival of banking institutions, the government took an initial series of measures in mid-October 2008 to prevent financing for the economy from coming to a halt and to restore confidence in the banking system. The key measures of that plan involved setting up two vehicles, one that would allow the banks to refinance themselves with a State guarantee, and another that would inject equity into the banks in order to bolster their solvency (Box 1.1).
Box 1.1. The plan for rescuing the banks and financing the economy Like the plans introduced in other European countries, the French rescue plan had the dual objectives of reinforcing the banks' solvency and easing their access to credit. To bolster solvency, the government has created a new agency, the Societe des prises de participation de l'Etat (SPPE), with funding of EUR 40 billion, which can be used to increase the capitalisation of banks that request injections. By the end of January 2009, two tranches of EUR 10.5 billion each had been extended to the six biggest French banks: the first tranche was announced in mid-October (and approved at mid-December by the European Commission), and the second was announced in mid-January. Both cases involved the SPPE's acquisition of super-subordinated securities of indefinite term issued by the banks concerned. While these are not equity as such, the banks can count these hybrid instruments as part of their Tier i capital ratios. At the same time, the government earns annual interest averaging 8.2% on these instruments. By choosing this way of injecting funds, the government has sought to ensure that its buy-in into the banks' capital does not dilute the interest of common shareholders and thereby discourage them from taking up future securities issues. SPPE itself is 100% owned by the State. A few weeks earlier, in concert with the governments of Belgium and Luxembourg, the French State had already participated in a EUR i billion bailout of the Dexia banking group: in this case, the intervention involved the acquisition of voting shares. To boost bank liquidity and thus compensate for the dysfunctional interbank market, the government set up a second vehicle, the Societe de Financement de l'Economie Francaise (SFEF), which is owned 66% by the banks and 34% by the State (with a blocking minority interest and a veto right). With the government's guarantee, SFEF can raise up to EUR 320 billion for lending to the banks. However, the guarantee is confined to loans contracted up to 31 December 2009, for a period of five years. Loan conditions include the posting of collateral that meets certain requirements in terms of quality, and an interest rate that represents a margin of 180 basis points over the rate SFEF pays for its borrowings. What distinguishes this approach from that followed in many other European countries is that the State guarantee applies to the banks' medium-term financing, rather than directly to interbank loans. By mid-march 2009, the banks had taken up some EUR 40 billion in loans through the SFEE Along with these measures, the government has instituted a lending programme for businesses (those with up to 5 000 employees are eligible), totalling EUR 22 billion, or around 1% of GDP. The funds used for this purpose are taken from cumulative deposits in "administered" savings accounts managed by the principal institutional investor acting on behalf of the State (the Caisse des Depots et Consignations, CDC). * Finally, the government has created a strategic investment fund to provide venture capital to innovative firms and, more importantly, to forestall foreign takeovers of French firms in sectors that are deemed "strategic". The fund has been established as a subsidiary of the CDC and is financed by loans from the State and from the CDC, amounting to EUR 3 billion each, topped up by securities or equity interests that the State and CDC hold in various French enterprises, to the amount of EUR 14 billion. The direct and immediate impact of these measures on public finances is fairly modest. In the case of capital invested in bank equity, this will simultaneously raise debt and assets in an amount equal to the second tranche (EUR 10.5 billion or around 0.5% of GDP), as the first tranche was funded from CDC cash holdings. Refinancing poses a threat to public finances only in the event that the State guarantee were to be called, which is rather unlikely. At the same time, the State earns net interest from the margin the banks must pay it in return for its guarantee and its capital injection. Moreover, even if CDC activities do not appear in the government accounts, that agency is nevertheless a public financial institution that is being heavily solicited in the current crisis. These moves by the CDC will have an impact on the central government budget if the yield from these operations is so low that returns to the State are substantially reduced. * In addition to managing a number of public pension regimes, the CDC takes the amounts collected in savings accounts at private banks, where remuneration is fixed by the State, and invests them, mainly in social housing.
These measures fall within the context of a European Union-wide rescue plan, and they have been accompanied by cuts to the European Central Bank's key interest rate and an easing of the conditions under which it provides funds to financial institutions. As a result, money market and interbank rates have subsided somewhat after spiking to around 180 basis points above expectations for the ECB key rate in mid-October. This has been followed by a moderate recovery of activity on the interbank market, although in both cases the situation is far from returning to normal. The French banks have come out of these financial and real estate crises with their balance sheets in better shape than those of their counterparts in many other countries. Only two banks have suffered losses from their subprime or Lehman exposures that were heavy enough to threaten their solvency. (1) Most of the other French banks, including the biggest ones, posted profits in 2008. Their exposure to toxic assets is still difficult to assess, however.
In this context, the real impact of these measures on lending to businesses and households is still unclear. In fact, although financial institutions certainly need to clean up their balance sheets, there are no obvious signs as yet of a credit crunch. In terms of lending to businesses, the appointment of a credit mediator has revealed numerous cases where companies have faced severe tightening on their overdraft privileges or a suspension of credit insurance. However, the number of cases handled since the mediation service was instituted in October 2008 represents barely 0.3% of all firms with fewer than 20 employees. (2) Moreover, after a significant jump in the first weeks of the programme, the flow of new cases has stabilised at around 450 per week, and three-quarters of these relate to firms with fewer than 10 employees. As well, surveys of banking institutions show that the tightening trend in credit to businesses, which began in the third quarter of 2007, continued in the last quarter of 2008, but that at the same time credit institutions were anticipating even lower demand in the first quarter of 2009.
When it comes to the cost of bank credit to non-financial companies, this has indeed risen, from 5.2% at the outset of 2008 to 5.6% in September, but after an easing that began in October those costs had fallen back by December to 4.9%. (3) Finally, while the latest available statistics on outstanding credit to nonfinancial companies show a clear slowdown, the annualised quarterly growth rate has remained significantly positive (dropping from 13.0% in December 2007 to 7.7% in December 2008 and to 6.9% in January 2009). This deceleration may, however, signal a real constraint, in that bank credit is being relied on, in part, to replace bonds as a source of corporate finance, given that the primary market for securities has dried up. After two months of net negative issuance in September and October (in both of which net redemptions amounted to EUR 1 billion), new issues recovered in November and December, at net flows of EUR 4.6 and EUR 9.4 billion, respectively (the December figure represents about 5% of the outstanding stock of securities). On the other hand, net share issues by nonfinancial companies remained slightly negative in November and December (EUR -0.5 billion).
Credit to households has tended to track developments in the housing market closely. Several indicators suggest that a housing-market correction was inevitable, although it may have been precipitated by the crisis. Not only had housing prices ballooned during the years since 2000, especially when compared to household disposable income, but the ratio of residential investment to GDP was higher than during the real estate boom of the late 1980s (Figure 1.2). Moreover, recent data on housing starts show that the decline in residential investment could well persist for several months longer. (4) As to house prices, it was only in the third quarter that they began to come down, at least in a generalised manner. Until now, their decline has been fairly moderate (1.1% since the peak), especially in light of the 150% nominal hike over the previous 10 years. Yet the sharp fall in the number of transactions suggests that the price slide could accelerate in the months to come. In this context, potential buyers have taken a wait-and-see attitude, which may explain why the demand for mortgages has slowed beyond what could be attributed to the tightening of credit conditions alone. In fact, the pace of growth in the volume of household mortgages granted by the banks has dropped, from an annualised quarterly growth of 6.5% in October 2008 to 4.5% in January 2009. This trend is confirmed by a decline of nearly 26% in new mortgages to households for the year 2008 as a whole, compared to 2007. While the banks may be assessing risk more strictly, there are good reasons to believe that this decline in lending has more to do with a reduction in demand than with shrinkage in the supply of credit.
[FIGURE 1.2 OMITTED]
In any event, there are some factors that could help stimulate demand for housing loans in the months to come. First, after rising by some 200 basis points between the end of 2005 and December 2008 to a peak of slightly over 5.3%, average interest rates on new housing loans began to ease slightly, by nearly 20 basis points, in January. The fact that the banks have finally begun to pass on the ECB's cuts to its key rate may be taken as a sign that their own access to financing is improving. Second, the easing of interest rates combined with lower selling prices is opening homeownership to new buyers by enhancing their repayment capacity (for a given amount of borrowing).S Third, in contrast to the situation in many other countries, France has not amassed a surplus stock of new housing, although the situation varies from one region or locality to another. In fact, estimates for the country as a whole suggest that there is something of a housing shortage.
Moreover, there are several reasons not to over-estimate the negative fallout on real activity and the financial system resulting from the housing-market correction. First of all, in contrast to the situation in the United States and the United Kingdom, the linkage between falling house prices and household consumption via the wealth effect is much more tenuous in France, mainly because lending conditions are generally stricter. As a result, household indebtedness levels are much lower than in countries that have been more exposed to the real estate crisis (Figure 1.3). The fact that households are in sounder shape financially may explain in part why the bankruptcy rate to date has remained fairly low, and consumption has remained stable while elsewhere it has fallen. (6) At the same time, tougher lending rules have allowed the banks to limit their vulnerability to the housing-market downturn. The main effect on global demand is confined essentially to the collapse of activity in the construction industry. But that shrinkage looks like it may have further to go: for example, the early 1990s recession saw residential investment as a share of GDP decline by some 1.1 percentage points, while the drop thus far in the current episode has been only 0.4 percentage point.
[FIGURE 1.3 OMITTED]
In any case, with obvious signs of a severe retreat in economic activity and evidence that the bank bailout plan will not alone suffice to stave off the expected decline in demand, the government adopted an economic recovery plan amounting to 1.3% of GDP. One characteristic of that plan was that it relied essentially on bringing forward to 2009 expenditures that were already planned, but scheduled over several years (Box 1.2). This was certainly the case with infrastructure development projects, but also with accelerated payment of amounts owed by the State to businesses, in order to cushion their cash flow difficulties. Hence, for the most part, these were "self-reversing" expenditures that will cause only a temporary bump in the fiscal deficit. Another characteristic was that the plan focused mainly on measures affecting business investment and cash flow, thereby boosting directly production rather than consumption. Since the plan was approved only at the beginning of January 2009, its economic impact is likely to become apparent only in the third quarter of the year. While the effect of the cash flow support measures could be felt sooner, some months are bound to go by before the investment projects really get underway.
Box 1.2. Key aspects of the economic recovery plan The economic recovery plan announced at the beginning of December 2008 contained a series of measures totalling EUR 26 billion, or around 1.3% of GDP, including 0.8% of GDP having an impact on public finances in 2009. Those measures can be classified as follows: * Measures to stimulate public investment: EUR 10.5 billion (0.5% of GDP): ** Directly by the State: EUR 4 billion for investment in infrastructure other than network industries (sustainable development, tertiary education and research, defence equipment, maintenance of cultural heritage). ** Via public enterprises: EUR 4 billion for the development of network industries (rail, postal services, energy). ** Via local governments: EUR 2.5 billion to finance new investments. * Measures to support SMEs (primarily for cash flow): EUR 11.5 billion (slightly more than 0.5% of GDP): ** Accelerated payment of amounts due from the State (EUR 9.7 billion). ** Accelerated depreciation of investments (EUR 0.7 billion). ** Higher initial payments on government procurement contracts (EUR 1 billion). * Measures to support the automotive and construction industries: EUR 2 billion (0.1% of GDP): ** A combination of measures to help first-time homebuyers finance purchases of new homes (a doubling of interest-free loans, subsidised loans for low-income families under the "Pass Foncier" scheme) and a construction stimulus package (additional construction of social and intermediate housing units, acceleration of the urban renewal programme) (EUR 1.5 billion). ** A cash bonus of EUR 1 000 for sending a 10 year-old (or older) car to the wreckers against purchase of a new one that meets environmental standards (EUR 0.2 billion). ** Additional funding for SMEs through the public support agency OSEO (EUR 0.2 billion). * Enhanced job-creation policies and employment incentives for micro enterprises: EUR 2 billion (0.1% of GDP): ** Firms with 10 employees or fewer are exempt from all social contributions for persons hired at the minimum wage (EUR 0.7 billion). ** Funding for supplementary measures to support employees and job-seekers (occupational transmission contracts) (EUR 05 billion). ** EUR 200 bonus for future beneficiaries of the Reuenu de solidarite active (income benefit for low-wage workers, RSA) programme that is to be launched in July 2009 (EUR 0.8 billion). These measures come on top of previously announced actions, including temporary suspension of the local business tax (taxe professionnelle) for new investments made between November 2008 and December 2009 (EUR 1.1 billion); and maintenance of 100 000 "assisted contracts" that were to be eliminated (EUR 0.3 billion). For the automotive industry, the government had already announced in October 2008 a plan to develop a zero-carbon-emissions vehicle, including R&D support (EUR 0.4 billion) and establishment of a network of recharging stations for electric cars. Since the recovery plan was announced, additional aid has been promised to the automotive and aviation industries, amounting to EUR 5 to 7 billion each, mainly in the form of loans and guarantees. Furthermore, additional measures amounting to EUR 2.6 billion (0.15% of GDP) were announced on 18 February 2009, including a one-time exoneration from income tax for low-income households, a payment to families with children who are eligible for the annual back-to-school benefit, vouchers usable for various household services and an increase in compensation for part-time unemployment.
The outlook for 2009 and 2010
Recent indicators suggest that the pace of decline in production may have intensified in the first quarter of 2009, as firms continue to run down their inventories and reduce investment in the face of weak orders and low confidence. In contrast, private consumption has shown some resilience so far this year, following a relatively strong outcome in the fourth quarter of 2008. However, the crisis has now hit the labour market severely, with a sharp increase in unemployment in the first months of 2009. After falling late last year, headline CPI inflation has been near zero in the first quarter, reflecting lagged effects of the earlier decline in energy and commodity prices. Stripped of the energy component, underlying inflation remains well above zero even if the rate has fallen.
Relatively tight borrowing conditions, combined with widespread declines in profits and little sign of recovery in order books, will likely lead to further inventory decumulation in the first half and falling business investment through most of 2009, as firms seek to bolster their balance sheets. In the case of households, uncertainty related to the sharp increase in unemployment in the first quarter and ongoing declines in asset prices are projected to result in a retrenchment of private consumption and residential investment in coming quarters, despite a modest increase in real disposable income. The fiscal stimulus package, along with substantial monetary easing and the additional measures to strengthen the banking system, will contribute to limiting the recession and support the recovery in 2010.
Real GDP growth is thus expected to remain negative throughout 2009, but at a steadily diminishing rate (Table 1.1). The recovery projected for 2010 will be weak, with growth remaining below potential rates until the end of the year. This is due in part to persistently weak demand abroad. Unemployment is projected to return to double-digit rates for the first time since 1999. Headline CPI inflation is likely to bounce back to positive rates fairly soon as the impact of past energy and commodity price declines tails off.
However, the build-up of substantial excess supply gaps on product and labour markets will maintain downward pressures on wages and prices across the board, contributing to a gradual decline in underlying inflation to close to zero by the end of 2010.
Given the poor job-market prospects and falling wealth, households are likely to raise their saving rate in the next few quarters, despite only very modest gains in real disposable income and a moderate level of indebtedness. The projected increase in domestic private-sector saving will be more than offset by public-sector dissaving, as the combination of automatic stabiliser effects, discretionary stimulus and the loss of buoyant revenues associated with the bursting of financial and housing market bubbles will push the general government deficit to above 6 1/2 and 8% of GDP, respectively, in 2009 and 2010. Even though this is largely cyclical, the structural deficit is also expected to widen by nearly one percentage point of GDP over the period, to around 4.5%. With a less severe decline in domestic demand than in large neighbouring countries, import weakness will be more moderate than in trading partners and net exports will continue to act as a drag on growth, leading to a widening of the current-account deficit, despite much lower imported energy prices.
Returning public finances quickly to a more sustainable path
After shrinking from 4.1% to 2.4% of GDP between 2003 and 2006, the general government deficit widened again in 2007, despite relatively favourable economic conditions, with excess demand estimated at nearly 1% of potential GDR Then, with the rapidly deteriorating economic situation in the second half of 2008, the deficit once again passed the 3% threshold, pushing the debt (Maastricht definition) to 67% of GDP. In 2009, the combined impact of the recession and the recovery plan is likely to drive the deficit to its highest level (relative to GDP) since the mid-1990s, which was the last time France saw a year (1993) of negative growth (Figure 1.4).
The loosening of fiscal policy in 2007-08 was induced by a drop in revenues rather than by any acceleration in expenditures, in contrast to previous episodes of fiscal stimulus. In fact, a number of measures adopted in 2006 had the effect of reducing combined personal and corporate income tax revenues by some 0.6-0.8% of GDP in 2007. Those measures included reducing the number of tax brackets for households (from 7 to 5), along with lower rates, a more generous PPE (earned-income tax credit), and an enriched research tax credit for corporations. Further income tax cuts were voted in August 2007 with adoption of the TEPA (Work, Employment and Purchasing Power Act), the annual impact of which in terms of lower revenues was felt primarily in 2008 (Projet de Loi de finances pour 2009, 2008a). The principal measures involved the exemption of overtime working hours (leading in particular to a significant decline in social contributions), the lowering of gift taxes on property transfers, and the reform to the "bouclier fiscal" (overall tax ceiling). Taken together, the tax and social contribution cuts contained in the TEPA amounted to the equivalent of around 0.4% of GDP in 2008, and this was only partially offset by increases in the funding of Social Security. While several of these measures adopted in 2007 will result in further relief for taxpayers over the years 2009-12, their annual impact in terms of stimulus will be fairly weak (less than 0.1% of GDP).
[FIGURE 1.4 OMITTED]
Despite tighter control over public expenditures in the last few years, relative to GDP they did not fall sufficiently in 2007 and 2008 to offset the tax cuts, and the general government deficit consequently rose. In fact, after two years of sharp declines in 2006 and 2007, the ratio of government spending went up again in 2008, although this could largely be attributed to cyclical factors. Whereas the inflation spike in the first half brought about a significant jump in debt service charges (mainly because of the heavy proportion of indexed bonds), the swiftly deteriorating economic situation in the second half was reflected in higher social transfers. In structural terms, the measures taken to limit public expenditure growth to around 1% by volume--including the only partial replacement of retiring civil servants--produced a slight decline in the total expenditure ratio.
In the 2009-12 stability programme submitted to the European Commission at the end of 2008, the government forecasted that the recovery plan announced in December would drive the overall public deficit to nearly 4% of GDP in 2009, but that the macroeconomic impact of the stimulus (estimated at 0.6% of GDP) would allow the economy to average slightly positive growth rates over the year. However, the sharp decline in economic activity recorded in the fourth quarter and lower-than-expected tax and social security revenue in 2008 prompted the government to revise its growth and deficit forecasts for the period 2009-2012. With activity expected to shrink by 1.5% in 2009, and a weak recovery expected in 2010, the authorities now foresee a deficit of close to 5.6% of GDP for 2009 and 5.2% of GDP for 2010, and they still hope to bring it below the 3% bar in 2012. Given the outlook for only sluggish recovery in 2010 and the possibility that new measures will be introduced, it is difficult to foresee a marked improvement in the deficit before 2011, if by then, unless further tightening measures are taken.
On this point, it has been a chronic feature of stability programmes and their underlying budget laws to spell out a profile for restoring fiscal balance that is subsequently never achieved. A review of past programmes reveals a quasi-systematic bias in budgetary forecasts, with the expected deficits nearly always underestimating the actual outcomes, even for the year immediately following publication (Table 1.2, Panel A). Since fiscal year 2001, the government has underestimated the deficit for the following year in five out of seven budgets, while its forecasts were correct or overestimated in only two cases (the end-2003 and end-2005 programmes). As of the second year out, the bias is systematic, even if it has kept below 0.2 point of GDP for three out of the six programmes, and it increases as the time horizon is extended. This perpetual postponement of the return to equilibrium tends to tarnish the credibility of multiyear budget planning. One of the factors contributing to this discrepancy is the relative optimism that colours growth assumptions for future years (Table 1.2, Panel B). First, the medium-term growth rate predicted in the programmes (2 1/4 or 2 1/2 per cent, depending on the year) has almost never been achieved in the course of this decade (with growth averaging only around 1.7%). Moreover, the growth forecast for the immediately following year has hit the mark in only two out of seven cases, even though the government's prediction was generally close to the consensus outlook.
This ongoing damage to credibility does little to win public acceptance of the need to clean up public finances. For one thing, it can give the impression that the sacrifices people are being asked to make--be they perceived or real--will be for naught. At the same time, it can sow doubt about the government's capacity to wield the levers needed to attain its objectives. Finally, besides tarnishing credibility, the systematic shortfall between objectives and performance leaves France exposed to sanctions under the Stability and Growth Pact every time there is a cyclical downturn, thus undermining the preventive role of the Pact (Senate, 2007). Faced with a similar problem of keeping its budget planning process credible in the early 1990s (when its fiscal deficit was out of control), the Canadian government reacted by adopting the opposite approach, i.e. choosing deliberately conservative macroeconomic assumptions. More specifically, the government of the day made it a rule to assume a growth rate that was systematically lower than the prevailing consensus, thereby introducing a bias into its planning forecasts and ensuring that its targets would be met or exceeded year after year (OECD, 1996). (7) There is no doubt that this was one of the measures that contributed to the success of the policy for restoring Canada's fiscal health. Without necessarily following an identical approach, the French government could draw inspiration from that success, for example, by setting its revenue and spending forecasts in a deliberately and openly conservative fashion relative to the real growth assumption, so as to maximise the probability that the objective for the budget balance would be achieved.
In any case, when it emerges from the crisis the government will find itself in a greatly weakened financial position, with a deficit similar to that of 1993 but now combined with a debt that is bigger by at least 30 percentage points of GDP. France is far from alone in this regard: many countries will be facing deficits that are just as high or even higher in some cases. The difference is that expenditure levels and the fiscal burden in France are already very high by international comparison, and the possibilities of eliminating the deficit through discretionary revenue increases are very limited. Past experience shows how difficult it can be to bring about a sustainable reduction in spending, particularly as rising indebtedness translates automatically into steeper interest payments. In this context, there are grounds to wonder whether the fiscal framework that has been in place in recent years is sufficiently constraining to guarantee a return to balance, and whether there are particular measures that could be considered for tightening expenditure control.
The trend of the revenue and expenditure profile over the last 30 years reveals that each time the budget has approached equilibrium--whether in 1980, 1988 or 2000--it was followed by an acceleration in expenditure that inevitably pushed the restoration of balance several years into the future (Figure 1.5). The early years of the 1990s and of this decade were both marked by an economic downturn that weighed heavily on expenditures. Yet the recovery, when it came, was never strong enough to bring spending back to the initial level relative to GDP, and outlays reached a new plateau at the end of each cycle. Thus, between the cyclical peaks of 1988 and 2000, spending rose by nearly 3 percentage points of GDP, reflecting higher social transfers and greater central and local government operating expenses as well as a heavier debt service burden (Table 1.3). On the other hand, public investment retreated over the same period. The overall expenditure level as a share of GDP rose again in the course of the next cycle, between 2000 and 2007, although the increase this time was much more modest (0.8 percentage points of GDP). Once again, transfers accounted for a good part of this increase, while operating expenses were under better control, and lower interest rates meant a reduction in debt service charges.
[FIGURE 1.5 OMITTED]
Among the factors that have served to dampen the increase in expenditure in comparison with the previous cycle has been a certain strengthening in the budgetary framework with adoption in 2001 of the State Finance Framework Law (Loi organique relative aux lois de finances, LOLF). The main contribution of the LOLF was to introduce mechanisms to improve the utilisation of budgeted resources. Among the main changes: expenditures are now classified by policy objective or "mission", rather than by administrative unit; managers have greater discretion in their use of budget envelopes, in exchange for more accountability; there is more systematic use of precise objectives and performance indicators; and budget transparency has been enhanced. The LOLF first came into full force in 2006, and some of its impacts have been felt only more recently.
The setting of multiyear fiscal targets, including the anticipated trend of the budget balance, is now anchored in a legislative framework that allows Parliament to approve appropriations ceilings for the next three years, and for each "mission" in the budgets Among other provisions of the 2008 Multiyear Budget Planning Law are some rules designed to contain the growth of general government expenditure by volume within an annual range averaging between 1 and 1 1/4 per cent over the period 2009-12. On this point, this law incorporates several rules or objectives set during recent years that affect the different levels of government but that were not anchored in a legal framework and introduces some new ones (Box 1.3). Thus, zero growth in central government volume outlays is an objective that dates back to 2002 but has been only partially achieved to date. In fact, with the exception of 2006, government volume outlays have risen steadily since 2002, although the upward trend slowed slightly over that period. In any event, even if the government had achieved its objective, the growth of outlays at all levels of government would still have exceeded by far the 1-1/4 per cent target set for the following years, because of the large contributions accounted for by local governments and the Social Security system (Table 1.4). (9)
To achieve this target, the rate at which total outlays have been growing in real terms since 2002 will have to be cut in half over the period 2009-12. Apart from the fact that this is unlikely to be attainable in a recession (2009) and a period of weak growth (2010), the target would seem ambitious even in normal economic times, since the growth rate of local government spending would have to be cut by two-thirds. The difficulty is illustrated by the fact that local spending accelerated in 2007 when the economy was still healthy, even if that hike may be attributable in part to the electoral cycle. (10)
Box 1.3. Budgetary rules at different levels of government The French budgetary framework contains three types of rules, applicable respectively to expenditures, revenues and the balance. Rules governing expenditures The rule set forth in the Programming Law includes growth targets for the volume of spending by central government and all public administrations. These are set, respectively, at zero and 1-1 1/4 per cent, until such time as budgetary balance is achieved. Those targets are now enshrined in law, but there is no corrective mechanism in case they are missed. A similar rule applies to a specific category of Social Security spending, namely sickness insurance, where the annual growth rate by value must not exceed 3.3% in 2008 and future years. This rule was already part of the legal framework before it was included in the Programming Law and is in principle somewhat more constraining in the sense that breaching the rule triggers corrective measures proposed by an independent committee, the Comite d'alerte independant. Despite making it more binding during the 2000s, the national objective for health-care spending voted annually by the parliament has nearly never been achieved since 1997, and the cumulative overspending has been over EUR 50 billion. Rules governing revenues Since 2006 (when although the budget was in deficit the government faced political pressure to spend the unexpected surplus in revenues), the central government has been bound by law to decide in advance how it will allocate any revenues in excess of those foreseen in the budget. In such a case, the decision is to be taken on the basis of discussions with the National Assembly and the Court of Accounts (the independent audit body). There is, however, no sanction mechanism if the rule is violated. In addition, the Multiyear Budget Planning Law introduces a new rule whereby the creation or expansion of any tax or social expenditure must be offset by deleting or cutting existing ones. It also incorporates the setting of annual objectives for containing the cost of existing mechanisms. It further stipulates that evaluation of measures in the realm of taxation or social security that are instituted as from the presentation of the Budget Planning Law should be made systematic, three years after they enter into force. The government has also pledged to conduct a thorough evaluation of all tax and social security loopholes by the end of its current mandate. Lastly, the Law stipulates that new measures resulting in a reduction in the level of tax revenues and/or social security fees or contributions will be offset, over the entire programming period, by an equivalent increase in revenue (State and social security), as long as the revenue level set by the Budget Planning Law has not been met. Rules governing the budget balance The main constraint on the level and profile of the budget balance comes from the Stability and Growth Pact, according to which a general government deficit beyond 3% of GDP triggers an "excessive budget deficit procedure". In addition, local governments are required by law to observe a "golden rule" based on budget accounting and overseen by the regional and territorial chambers of accounts, which have a responsibility to propose corrective measures if the rule is not adhered to.
In this context, the strengthening of the budgetary framework implied by the Multiyear Budget Planning Law represents an important step forward, but it will not be enough to ensure that ambitious targets can be met. On the one hand, the multiyear dimension of the law makes it easier to manage appropriations for each "mission", given that the proportion of annual outlays subject to discretionary adjustment does not exceed 5%. On the other hand, despite a somewhat tougher political commitment, the constraining power of the budgetary rules is still limited, as the government can override them by legislation. For example, the rule requiring balance in the Social Security accounts has not prevented rising deficits (let alone eliminated them), although it was originally more constraining than other rules. More generally, the many rules introduced in the last several years and the oft-declared intention to control outlays more effectively have led to only a slight decline of spending, in structural terms as a proportion of GDR
Yet, many countries have succeeded in reducing expenditures as a proportion of GDP over the last 10 years (Figure 1.6), in some cases quite significantly (in particular the Nordic countries, but also Germany, Austria and Canada). Their experience shows, however, that ambitious objectives demand a thorough rethinking of the role and the forms of State intervention in various fields, and call for actions that go beyond the budgetary framework. In the case of France, a significant and sustainable reduction in the spending-to-GDP ratio is quite feasible, especially in light of the potential savings to be found in each of the major components of public expenditure, fie. central government, local governments and Social Security. Achieving these savings, however, will require vigorous pursuit of the reforms now underway, and additional efforts as well.
With the launch of the General Policy Review (Revision generales des politiques publiques, RGPP), the government adopted a more methodical approach to reforming the State. The declared objective is to provide a framework to identify ways for making government more efficient, by auditing all government programmes and services. As part of this exercise, various teams of auditors from the ministries and from the private sector set out to answer questions about the nature and justification of State policies in every field, and about the ways to make those policies more effective. (11) What this amounts to is a re-examination of the way the State intervenes, and this is indeed a positive move. In the wake of audits to date, more than 300 measures have been identified and approved by the government for gradual implementation between 2008 and 2011. In principle these measures are to be monitored by teams created within each ministry. The anticipated savings from these reforms are estimated at some EUR 7 billion over three years, including EUR 3 billion in payroll costs, EUR 2 billion in subsidies and investments, and slightly over EUR 2 billion in other operating costs. On the payroll front, the savings will come entirely from reduced staffing levels in the civil service, and will be achieved through attrition (i.e. by replacing only a portion of those retiring).
[FIGURE 1.6 OMITTED]
In light of the expectations that an exercise of this kind might elicit, the forecast savings of EUR 7 billion are certainly modest in comparison with the global amount of public spending, which is nearly EUR 1 trillion. Moreover, it is far less than the savings necessary to achieve the 1-1 1/4 per cent spending growth target (which is around EUR 50 billion), (Cour des Comptes, 2009). One reason for the lack of the savings is that, while the RGPP was supposed to be general in its scope, it was in the end confined essentially to central government outlays (around 30% of the total), while Social Security and local government spending were largely excluded. But even in terms of central government spending alone, these savings fall far short of the potential estimated by the Institut de l'entreprise in 2006 in its Obseruatoire de la depense publique. (12) Without going that far, however, it is to be hoped that the State will persevere in implementing the measures identified by the RGPP and at the same time avoid as far as possible any expansion of its scope of intervention. This objective has indeed been largely respected in the first recovery plan where, apart from the extension of "occupational transition contracts", few of the measures will be hard to reverse.
While the issue of local government spending was not explored in the RGPP, the Institut de l'entreprise study found that considerable savings can be achieved in this area, especially insofar as local governments' share in total spending has been rising steadily, and not only because of the transfer of responsibilities to the local level. (13) This can be explained in part by the structure of financing between the different levels of government. Together with the transfer of responsibilities, the share of their own tax revenues in local government budgets has steadily declined in favour of transfers from the State. The sometimes tenuous link between the locus of resource management and the source of funds does little to foster local governments' accountability for their expenditure choices (OECD, 2007). Moreover, local governments may have considered that the transfer of powers was not sufficiently accompanied by a proportionate transfer of human resources, even though Act II of the 2003 decentralisation had called for comprehensive transfers of the staff needed to administer those powers. What in fact was observed was an increase in staffing levels above and beyond the transfers. Finally, the plethora of overlapping territorial structures is itself a source of duplication in services and programmes. Co-operation between groups of small municipalities has not produced the economies of scale that might have been expected, particularly when it comes to procurement and facilities management. On this point, and in the wake of the debate unleashed by the Attali Commission Report--recommending, inter alia, the elimination of one of the administrative levels (the departement)--the government created a "Committee for Local Government Reform", chaired by former Prime Minister Edouard Balladur, to examine ways to simplify the administrative structure. The recommendations of this committee include the merger of certain regions or departements on a voluntary basis. The government has pledged that in the months ahead it will prepare draft legislation inspired by these proposals.
Recognising that social transfers are the items that have contributed most to the increase in overall expenditures, it would also be desirable to subject them to an RGPP-type exercise. Efforts at rationalisation have already been made, indeed. For example, the two main institutions responsible for compensating the unemployed (UNEDIC) and the public employment service (ANPE) have been merged, and user (co-insurance) charges have been introduced for drugs and certain paramedical services, leading to savings in health insurance costs. Yet, while productivity gains can no doubt be found by re-organising the management of social programmes, really significant savings on the social benefits' side will surely require a critical reappraisal of certain services and programmes that have not demonstrated their effectiveness. Unfortunately, since the least efficient programmes are often those with the greatest number of beneficiaries, such a reappraisal, even if partial, is bound to be politically difficult.
On this point, it is quite revealing that to complete the financing of the Revenu de solidarite active (the new incentive to work for those with low earnings potential), a new tax has had to be introduced (see Chapter 2). This is regrettable, all the more so because introduction of this new measure could have provided the occasion to withdraw, or at least to refocus more significantly, another existing measure (the earned-income tax credit, PPE), which has similar objectives but is of questionable effectiveness because there are too many beneficiaries receiving too little benefit in relation to their income. Similarly, substantial economies could be achieved by reconsidering the universality of certain benefits--in particular the family allowances--and either subjecting them to a means test or bringing them into the income tax base. More generally, "tax expenditures" should be subjected to the tests of effectiveness and legitimacy, as stipulated in the Budget Planning Law and as the government has pledged do to, since they often amount to transfers even if they are not treated as such from a national accounts or budget viewpoint. The number of tax loopholes has increased by more than 200 since 2002, and their total cost in terms of forgone revenue is officially estimated at EUR 70 billion per year (3.5% of GDP).
Over the longer run, only with a very sifinificant increase in the employment rate will it be possible to restore the financial health of the Social Security accounts without a thorough rethinking or at least an important change in the parameters governing numerous social benefits. By way of example, the steady decline in unemployment (until its abrupt reversal in 2008) had allowed the unemployment insurance fund to post a surplus as of 2007. There is especially great potential for raising the employment rate in France, which is now one of the lowest in OECD countries. Indeed, the nearly S percentage point gap in employment rates between France and Germany explains in part the difference of eight percentage points of GDP in the overall level of expenditures. A higher employment rate is all the more necessary as demographic ageing is bound to have a non-negligible fiscal impact, even if it will be smaller than in other European countries. (14) Clearly, the current crisis makes it difficult to envision such an increase in the next two or three years, but even over the longer term a significantly higher employment rate, especially among youth and seniors, will be hard to achieve unless current and future efforts to reform the labour market are successful (see Chapter 2).
Box 1.4. Summary of recommendations relating to public finances * Implement the recovery plan swiftly and effectively by ensuring the greatest possible coordination among different players involved in distributing the additional resources. If the recession lasts longer than expected, consider adopting additional measures, preferably of a temporary or self-reversing nature, in order to safeguard the sustainability of public finances. * Once the recovery is underway, move decisively to implement a strategy for reducing the deficit at all levels of government over the medium term, according to an explicit path. * Restore credibility to the budget process by adopting an approach whereby revenue and expenditure forecasts associated with growth scenarios are deliberately and openly conservative, to ensure that the objectives are likely to be achieved year after year. * Focus the public finance consolidation effort on reducing expenditures, in particular through complete coverage of Social Security accounts by the General Policy Review and by encouraging local governments to undertake a similar process. * Strengthen the incentives to better expenditure control by giving greater visibility to the cost, in terms of taxes and compulsory contributions, of measures taken at each level of local government, and by eliminating duplication of programmes and services among the different levels. * Take advantage of the new provision offering incentives for those with low potential earnings to seek work (the Revenu de solidarite active or RSA) to refocus completely the existing provision (the earned income tax credit, prime pour l'emploi or PPE). * Examine all tax loopholes to reconsider their effectiveness and legitimacy.
Camdessus, M. (2004), "Le sursaut--Vers une nouvelle croissance pour la France", Rapport au ministre de l'Economie, des finances et de l'industrie, La Documentation francaise, Paris.
Commission Attali (2007), Rapport de la Commission pour la liberation de la croissance francaise, Paris.
Commission Pebereau (2006), "Pour des finances publiques au service de notre croissance et notre cohesion sociale", Rapport remis au Ministre de l'economie, des finances et de l'industrie.
Cour des comptes (2009), Rapport public annuel, January, Paris.
Institut de l'entreprise (2006), "L'Agenda 2012:37 propositions pour une meilleure maitrise de la depense publique", Les Notes de l'Institut, April.
OECD (1996), OECD Economic Survey of Canada, OECD publishing, Paris.
OECD (2007), OECD Economic Survey of France, OECD publishing, Paris.
Projet de Loi de finances pour 2009 (2008a), Rapport sur les prelevements obligatoires et son evolution, Paris. Projet de Loi de finances pour 2009 (2008b), Rapport sur la depense publique et son evolution, Paris.
Senat (2007), Rapport d'information sur le debat d'orientation sur les finances publiques, No. 400, Paris.
(1.) These are Natixis and the Banques Populaires. The Societe Generale also constituted provisions at the beginning of 2008 following the loss of EUR 5 billion as a result of unlawful transactions by one of its traders. The bank nevertheless reported a profit for the year.
(2.) By excluding from the number of firms those reporting no employees. Of the 5 000 cases filed since the mediator began work in October 2008, some 40% had been settled by the end of January 2009. About two-thirds of those had a positive outcome, fie. a situation that allowed the firms to remain in business. About 10% of the cases submitted were rejected at the outset.
(3.) These are the rates charged by French banks on loans of less than one year to non-financial companies for amounts below EUR 1 million; for higher amounts, the rates are lower but have followed a similar profile.
(4.) After a record year in 2007, housing starts dropped 16% on average in 2008, returning to their 2004 level.
(5.) In this sense, the solvency index of new borrowers has improved since November 2008.
(6.) The latest available data on household over-indebtedness show that the total number of cases filed in September 2008 was slightly down (by 0.4%) from September 2007.
(7.) In addition, the deficit projections incorporated generous contingency reserves in order to confront possible future negative shocks.
(8.) This new feature was made possible by the constitutional amendment of 21 July 2008, one objective of which was to bolster Parliament's powers.
(9.) Even though the contributions presented in Table 1.4 are calculated for fixed spending responsibilities across the different levels of government, it must be emphasised that some of the spending areas that the State transferred to local governments are growing quickly (for example, the guaranteed minimum income, which is becoming the revenue de solidarite active, RSA).
(10.) In 2007, growth in local government spending proved more dynamic than in 2006, due inter alia to rising investment by municipalities, attributable in part to the municipal elections of early 2008, and to the sharp rise in the total wage bill excluding transfers.
(11.) More precisely, the audit teams were to answer seven questions: What does government do? What are the public's needs and expectations? Should it continue to do the saine things? Who should do it? Who should pay? How can things be done better and more economically? How should the transformation be handled?
(12.) That report offered 17 proposals for reducing State spending by between EUR 45 and EUR 52 billion (Institut de l'entreprise, 2006). Those proposals were in part inspired by the Camdessus (2004) and Pebereau (2006) reports. It should be noted, however, that some of them were implemented before the RGPP, thereby reducing the potential for further savings.
(13.) Of the 37 proposals contained in the Obseruatoire de la depense publique, six concerned local governments and involved potential savings of nearly EUR 25 billion, more than half of which would come from greater cooperation (or amalgamation) between local governments in order to share and reduce management costs, and from relying more on private partners.
(14.) In its 2007 report, the Conseil d'orientation des finances publiques argued that ageing could raise public spending by slightly more than 3 percentage points of GDP, with unchanged policies.
Table 1.1. Recent macroeconomic developments 2005 2006 2007 2008 Current prices in [euro] percentage changes, billion volume (2000 prices) Private consumption 980.4 2.5 2.4 1.3 Government consumption 408.4 1.4 1.4 1.5 Gross fixed investment 343.8 5.0 4.9 0.3 Public 56.9 -2.1 1.7 -1.2 Residential 96.3 6.9 2.9 -1.1 Non-residential 190.6 6.3 6.8 1.5 Final domestic demand 1 732.7 2.7 2.7 1.2 Stockbuilding (1) 5.9 -0.1 0.2 -0.2 Total domestic demand 1 738.5 2.6 2.9 1.0 Exports of goods and services 448.8 5.6 3.2 1.1 Imports of goods and services 463.5 6.5 5.9 2.0 Net exports (1) -14.7 -0.3 -0.8 -0.3 GDP at market prices 1 723.8 2.4 2.1 0.7 Memorandum items: Employment 0.6 1.8 1.4 Unemployment rate (2) 8.8 8.0 7.4 GDP deflator 2.5 2.5 2.2 Harmonised index of consumer prices 1.9 1.6 3.2 Core harmonised index of consumer prices (3) 1.5 1.6 1.8 Household saving ratio (4) 11.7 12.4 12.4 General government financial balance (5) -2.4 -2.7 -3.4 Current account balance (5) -0.7 -1.2 -2.0 2009 2010 percentage changes, volume (2000 prices) Private consumption -0.3 0.2 Government consumption 1.4 1.3 Gross fixed investment -7.1 -1.8 Public -1.6 1.7 Residential -6.2 -2.4 Non-residential -9.1 -2.6 Final domestic demand -1.3 0.0 Stockbuilding (1) -1.1 0.1 Total domestic demand -2.4 0.1 Exports of goods and services -11.4 -2.3 Imports of goods and services -7.6 -1.0 Net exports (1) -0.8 -0.3 GDP at market prices -3.3 -0.1 Memorandum items: Employment -1.9 -0.9 Unemployment rate (2) 9.9 10.9 GDP deflator 1.2 0.6 Harmonised index of consumer prices 0.4 0.6 Core harmonised index of consumer prices (3) 1.3 0.6 Household saving ratio (4) 13.2 12.9 General government financial balance (5) -6.7 -8.3 Current account balance (5) -2.3 -2.4 Note: National accounts are based on chain-linked data. (1.) Contribution to changes in real GDP (percentage of real GDP in previous year), actual amount in the first column. (2.) As a percentage of labour force. (3.) Harmonised index of consumer prices excluding food, energy, alcohol and tobacco. (4.) As a percentage of disposable income. (5.) As a percentage of GDP. Source: OECD, Economic Outlook database. Table 1.2. Budget balance and growth rate forecasts included in stability programmes Publication Date 2001 2002 2003 2004 2005 2006 A. General government budget balance (% of GDP) Stability programme: 2003-05 End 2001 -1.4 -1.4 -1.3 -0.5 0.0 2004-06 End 2002 -2.8 -2.6 -2.1 -1.6 -1.0 2005-07 End 2003 -4.0 -3.6 -2.9 -2.2 2006-08 End 2004 -3.6 -2.9 -2.2 2007-09 End 2005 -3.0 -2.9 2008-10 End 2006 -2.7 2009-12 End 2007 2009-12 End 2008 Budget balance outcome (OECD projections for 2009 and 2010) -1.56 -3.16 -4.11 -3.63 -2.97 -2.40 B. Real GDP growth (%) Stability programme: 2003-05 End 2001 2.1 2.5 2.5 2.5 2.5 2004-06 End 2002 1.2 2.5 2.5 2.5 2.5 2005-07 End 2003 0.5 1.7 2.5 2.5 2006-08 End 2004 2.5 2.5 2.5 2007-09 End 2005 1.8 2.3 2008-10 End 2006 2.3 2009-12 End 2007 2009-12 End 2008 GDP growth outcome (OECD projections for 2009 and 2010) 1.76 1.10 1.09 2.22 1.92 2.36 Publication 2007 2008 2009 2010 2011 2012 A. General government budget balance (% of GDP) Stability programme: 2003-05 2004-06 2005-07 -1.5 2006-08 -1.6 -0.9 2007-09 -2.6 -1.9 -1.0 2008-10 -2.5 -1.8 -0.9 0.0 2009-12 -2.4 -2.3 -1.7 -1.2 -0.6 -1.1 2009-12 -2.9 -3.9 -2.7 -1.9 -1.1 Budget balance outcome (OECD projections for 2009 and 2010) -2.68 -3.40 -6.67 -8.28 B. Real GDP growth (%) Stability programme: 2003-05 2004-06 2005-07 2.5 2006-08 2.5 2.5 2007-09 2.3 2.3 2.3 2008-10 2.3 2.3 2.3 2.3 2009-12 2.1 2.3 2.3 2.3 2.3 2009-12 1.0 1.0 2.0 2.5 2.5 GDP growth outcome (OECD projections for 2009 and 2010) 2.11 0.70 -3.25 -0.15 Note: The stability programmes published at the end of 2007 and 2008 refer to the same horizon. When programmes included more than one scenario, the low-growth one was chosen. When growth assumptions were set as an interval, the figure taken as the reference for public finance projections was chosen. Source: OECD based on successive French stability programmes and OECD Economic Outlook database. Table 1.3. Main components of general government expenditures Per cent of GDP Change over 1979 1989 2000 2007 1979-2007 Total expenditures 44.6 48.7 51.6 52.4 7.7 Final consumption expenditures Wage consumption 12.5 12.2 13.3 12.9 0.4 Non-wage consumption 8.2 9.4 9.5 10.3 2.0 Expenditures on transfers Social benefits (1) 18.8 20.7 22.7 23.5 4.7 Subsidies 2.0 1.8 1.5 1.4 -0.7 Debt charges 1.1 2.5 2.9 2.7 1.6 Gross fixed capital formation 3.0 3.4 3.1 3.3 0.2 Capital transfers and payments -1.1 -1.3 -1.5 -1.7 -0.6 (1.) Including various other transfers such as payments for museums and national parks. Source: OECD, Economic Outlook database. Table 1.4. Contributions to growth in total public expenditures 2002 2003 2004 Growth in total public expenditures (% growth in volume) 3.8 2.3 2.2 Contribution from the State 0.9 0.2 0.5 Contribution from the ODAC (1) 0.0 0.2 -0.4 Contribution from the APUL (2) 1.0 0.8 0.7 Contribution from the ASS0 (3) 1.0 1.3 1.1 2005 2006 2007 Growth in total public expenditures (% growth in volume) 2.6 1.6 2.5 Contribution from the State 0.5 0.0 0.2 Contribution from the ODAC (1) 0.1 0.3 0.1 Contribution from the APUL (2) 0.7 0.7 0.9 Contribution from the ASS0 (3) 1.1 0.8 1.2 (1.) Various organisms affiliated to the State. (2.) Local governments. (3.) Social security system. Source: Projet de Loi de finances pour 2009 (2008b).
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Chapter 1|
|Publication:||OECD Economic Surveys - France|
|Date:||Apr 1, 2009|
|Previous Article:||Assessment and recommendations.|
|Next Article:||Progress in labour market and other reforms.|