Annual report 2005 - Dexia.com

DexiaPublic/Project Finance and Credit Enhancement1999-2004: maintenanceof the local investment effortwithout harming financialbalances• Dynamic local expenditure in 2004Between 1999 and 2004, local publicexpenditure in the Fifteen (EUR 1,259 billion)saw sustained development (+4.5% on annualaverage in volume). That momentum is to alarge extent the result of major transfers ofcompetence in favor of local authorities invarious countries (for example Italy, Franceand above all Spain).In 2004, the evolution of local publicexpenditure was dynamic in the Europe ofthe Fifteen (+3.7% in volume), driven by theincrease of health and social expenditure.It was even more for the ten new entrants(+5.3% in volume), as a consequence of theassumption of additional competences inseveral of those countries.• An investment effort maintainedin 2004Local public investment expenditure withinthe Europe of the Fifteen (EUR 149 billion)evolved on annual average by +3.0% involume between 1999 and 2004. After ratherstrong annual growth rates between 1999 and2001 (between 3.5% and 6.5% dependingupon the year), local investment in the Fifteenhas slowed since 2002, with annual growthrates in the order of 1.5% to 2%.In 2004, local investment expenditure rosemoderately for the Europe of the Fifteen(+1.5% in volume), and more dynamically forthe ten new entrants (+3.4% in volume).The local authorities of the Twenty-Five thusplay their role as leading public investors: localpublic investment expenditure amounted toEUR 158 billion in 2004, or 62.8% of publicinvestment expenditure and the equivalent of1.5% of GDP in the European Union of theTwenty-Five.• Financial balances preservedDuring the period from 1999 to 2004, thebudget balance of the local public sector stillremained close to balance.In 2004, local deficits in the Europe of theFifteen deteriorated very slightly to reach0.22% of GDP.Over the same period, local debt(EUR 572 billion) remained under control inrelation to GDP (5.8% of GDP in 2004).The budget balance of the local public sectorof the ten new entrants is almost balanced(-0.05% of GDP in 2004) and their localdebt is still not very high in relation to GDP(2.0% in 2004).Trends in 2005The major orientations observed for 2005in the twenty-five countries of the EuropeanUnion and published in November 2005 inthe economic report can be summarized asfollows.• Contrasted evolutions of localexpenditure and investmentdepending upon the countryconcernedLocal public expenditure should still bedynamic in the United Kingdom, as well asin France as a consequence in particular ofnew transfers of competence. In Portugal,expenditure could increase with the holdingof municipal elections.In the other countries, local expenditure shouldevolve more moderately, as in Belgium or Italy,countries in which the internal stability pact for2005 fixes the limits to its growth.52