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Impact of financial and debt crisis on local and regional authorities.

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Impact of financial and debt crisis on local and regional authorities. Frank Lierman, Chief Economist Belfius Bank ECOS, Committee of the Regions – PowerPoint PPT presentation

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Title: Impact of financial and debt crisis on local and regional authorities.


1
Impact of financial and debt crisis on local and
regional authorities.
  • Frank Lierman, Chief Economist Belfius Bank
  • ECOS, Committee of the Regions
  • Brussels , April 26, 2012

2
Impact of financial and debt crisis on local and
regional authorities
  • The financial and debt crisis.
  • Investments in danger.
  • How to restore the self-financing capacities ?
  • Limited financing capabilities of banks.
  • Alternatives for financing public facilities.

3
The financial and debt crisis.
  • The sequence of events.
  • Financial, economic, social, public finance
    sovereign debt

4
The financial and debt crisis.
  • Subnational revenues has been affected by the
    economic and public finance crisis.

Subnational revenue in the EU27 from 2000 to 2010
Subnational revenue by category in 2010 ( of
total revenue)
4
5
The financial and debt crisis.
  • Subnational expenditure a global cost control
    combined whit higher level of social costs.

Subnational expenditure in the EU27 from 2000 to
2011
Subnational expenditure by category in 2010 ( of
total expenditure)
5
6
The financial and debt crisis.
  • Budget balance in danger.

Public budget balance in EU27 from 2000 to 2010
( of GDP)
Subnational public budget balance in the EU27
from 2000 to 2010 ( of GDP)
6
7
The financial and debt crisis.
  • Public debt increased sharply.
  • Public debt by sector in the EU27 from 2000 tot
    2010 - change

7
8
The financial and debt crisis.
  • Public debt increased sharply. (2)
  • Public debt by sector in the EU27 from 2000 tot
    2010 - of GDP

8
9
Impact of financial and debt crisis on local and
regional authorities
  • The financial and debt crisis.
  • Investments in danger.
  • How to restore the self-financing capacities ?
  • Limited financing capabilities of banks.
  • Alternatives for financing public facilities.

9
10
Investments in danger.
  • Austerity plans are not neutral.
  • A freezing or a reduction in central government
    transfers.
  • Stricter rules for borrowing.
  • Spending restrictions.
  • Reduced capacity to increase the tax burden

10
11
Investments in danger.
  • Essential services.
  • Employer, service provider, economic agent,
    investor and national solidarity player
  • Expenditure 17 of GDP and 34 of public
    spending
  • Direct investment 65 of public sector

Subnational expenditure by economic function in
the EU27 ( of total expenditure)
11
12
Investments in danger.
  • But essential services/investments cannot be
    reduced.
  • Replacement investments for renewing existing
    infrastructure and equipment (68 of all
    investments in EU)
  • Catch-up investments responding to demand/needs
    for
  • public infrastructure
  • renovation of buildings
  • innovation in transport
  • deployment of new technologies
  • More cyclical or one-off needs
  • local elections
  • 2007 2013 Structural Funds envelopes
  • special events cultural, sports, natural
    catastrophes,
  • Major longer term issues
  • ageing
  • sustainable environnement
  • Traditional counter-cyclical role

12
13
Impact of financial and debt crisis on local and
regional authorities
  • The financial and debt crisis.
  • Investments in danger.
  • How to restore the self-financing capacities ?
  • Limited financing capabilities of banks.
  • Alternatives for financing public facilities.

13
9/30/2014
14
How to restore the self-financing capacities ?
  • Structure of revenues and expenditures in EU27 in
    2010.

(in of total)
14
15
How to restore the self-financing capacities ?
  • Actions which can be undertaken.
  • Revenues
  • maintaining or enlarging tax revenues
  • boosting tariffs and fees
  • optimising assets revenues
  • optimising grants and subsidies captation
  • Expenditures
  • reducing staff costs
  • better control on financial costs
  • improving control on social spending costs
  • reinforced cost control on purchases
  • implementing investment policies

15
16
How to restore the self-financing capacities ?
  • The assets and liabilities composition as of
    December 2010 in EU27.

(in bn euro)
Net financial liabilities - 278 bn
16
17
Impact of financial and debt crisis on local and
regional authorities
  • The financial and debt crisis.
  • Investments in danger.
  • How to restore the self-financing capacities ?
  • Limited financing capabilities of banks.
  • Alternatives for financing public facilities.

17
18
Limited financing capabilities of banks.
  • Reduction of number of actors
  • Withdrawal of foreign banks
  • Increase of margins
  • Constraints of Basel III ? less volumes, more
    expensive
  • Danger of credit crunch

18
19
Impact of financial and debt crisis on local and
regional authorities
  • The financial and debt crisis.
  • Investments in danger.
  • How to restore the self-financing capacities ?
  • Limited financing capabilities of banks.
  • Alternatives for financing public facilities.

19
20
Alternatives for financing public facilities
  • Which financing models ?

20
21
Alternatives for financing public facilities
  • Products and clients diversification in order to
    maintain funding capacities.

21
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