Thursday, July 14, 2011

Financial Management

The recent decentralization movement thus results in the management by local authorities of new economic functions in a new accounting and budgetary framework. The resources that these functions will induce change in level as the budgets that structure.
Local authorities must seek new funding to implement investments related to the exercise of their economic function, despite a high savings capacity.

With a self-borrowing, local governments must make a tradeoff between own resources and resources of loans to finance their investments. The bond acts as an adjustment variable whose magnitude depends on both the level of savings and the relative level of debt earlier.

After several years of moderate changes, it appears that the dynamism of local public investment began in 2003 continues at an annual growth of 8% for 4 years. Local communities continue to invest heavily:

* The election cycle is conducive to investment communal;
* While nearly 70% of public investment is devoted to building and public works, costs in construction and public works experience sustained growth;
* The transfer of responsibilities will encourage communities to support heavy investments (railway equipment, road investment ...).

This increase in investment volume is characterized by a need for increased funding. This results in increases in taxation and an increased reliance on borrowing, facilitated by a context of interest rates still low. In late 2006, the amount of the debt of local authorities is around 111 billion Euros, equivalent to 6% of GDP. This proportion is low in light of European commitments on debt: according to the Maastricht Treaty, the debt cannot exceed 60% of global GDP. In addition, the "financial valve" that is the fiscal autonomy increases the flexibility of local authorities in terms of borrowing.

The principles governing the development of local budgets (principle of annual, principle of unity, and rule of balancing the budget ...) require local management framed.
Therefore, despite important differences, the level of risk and solvency of all local authorities is excellent.