France's Subnational Insolvency Framework

In Until Debt Do Us Part: Subnational Debt, Insolvency and Markets O. Canuto and L. Liu (Washington, DC, The World Bank, 2013)

40 Pages Posted: 13 Oct 2014

See all articles by Lili Liu

Lili Liu

World Bank - Poverty Reduction and Economic Management Network (PREM)

Norbert Gaillard

NG Consulting

Michael Waibel

University of Cambridge - Faculty of Law; Lauterpacht Centre for International Law; University of Cambridge - Jesus College

Date Written: April 8, 2013

Abstract

During 1982–83 and 2003–04, two waves of decentralization in France devolved more powers to the three levels of subnational governments (SNGs): the municipalities, the departments, and the regions. This new institutional framework has enabled SNGs to enjoy a greater degree of autonomous expenditures, to raise their own taxes, and to borrow from financial markets, within ex-ante rules established by the central government. However, SNGs are subject to ex-post controls by the Prefect and the Regional Chambers of Accounts, and to on-going controls by the Public Accountants.

The French system, which combines decentralized responsibilities and fiscal decisions with fiscal monitoring by the central government, offers valuable experience for countries undergoing decentralization. State supervision has resulted in the avoidance of major SNG defaults — although several debt restructurings occurred in recent decades, which partly explains the high credit ratings — “AA,” on average — assigned by rating agencies. Nonetheless, the lack of a clear, established legal structure for priority payments creates uncertainties. Off-budget entities, such as state-owned enterprises, pose contingent fiscal risks, a common challenge across countries.

Keywords: subnational insolvency; subnational bankruptcy; France; defaults; public accountants

JEL Classification: P43

Suggested Citation

Liu, Lili and Gaillard, Norbert and Waibel, Michael, France's Subnational Insolvency Framework (April 8, 2013). In Until Debt Do Us Part: Subnational Debt, Insolvency and Markets O. Canuto and L. Liu (Washington, DC, The World Bank, 2013) . Available at SSRN: https://ssrn.com/abstract=2507142

Lili Liu (Contact Author)

World Bank - Poverty Reduction and Economic Management Network (PREM) ( email )

Washington, DC 20433
United States

Norbert Gaillard

NG Consulting ( email )

France

HOME PAGE: http://www.norbertgaillard.com/

Michael Waibel

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

Lauterpacht Centre for International Law ( email )

5 Cranmer Road
Cambridge, CB3 9BL
United Kingdom

University of Cambridge - Jesus College ( email )

Jesus Lane
Cambridge, CB5 8BL
United Kingdom

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