French local governments, including regions and municipalities, struggle to trim operational expenses enough to prevent further cuts in investment and an increase in debt, the state auditor said in a report published on Tuesday.
The report comes as President Francois Hollande is squeezing spending and slashing taxes on businesses at the state’s level in a bid to reduce France’s budget shortfall and revive an economy that has barely expanded in three years. Budget cuts, which include scrapping transfers from the central government to local authorities, aim to stabilize public debt at 96.5 percent of gross domestic product in 2017, according to budget goals presented last month by Finance Michel Sapin.
Local governments need to slow the increase in operational expenses to 0.7 percent in 2015 from 2.2 percent in 2014, a magnitude that will be difficult to achieve in the short term, the auditor said.
Local investment is set to decline along with planned cuts in transfers from the state to local authorities through 2017, according to the report. Investment dropped by 9.2 percent in 2014 from 2013 while debt rose to 179 billion euros in 2014 from 174 billion euros a year earlier.
Cutting transfers to all municipalities without taking into account their respective sources of income and expenses does not seem appropriate, the auditor also said.