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Expenditure rules à la française: an assessment after five years

Laurent Moulin

Expenditure rules à la française: an assessment after five yearspdf(203 kB) Choose translations of the previous link 

In 1998, France introduced a new budgetary strategy based on setting multi-annual objectives for increases in real general government expenditure. This strategy, which helps forming expectations and enhances the transparency of the budgetary framework, is economically pertinent. However, in the first five years of its implementation, the strategy did not lead to the expected results. Initial targets were missed by a large margin, and the objective of consolidating public finances through a structural decline in the expenditure-to-GDP ratio was not achieved.

Identifying the causes for the difficulties of the French budgetary strategy is a necessary prerequisite for possible improvements. The analysis of recent developments allows isolating two main causes. First, the French budgetary rule is relatively ‘weak’, in the sense that it is not enforceable, and, second, the ambitious expenditure targets were not supported by adequate public finance reforms. Recent developments have, however, triggered some hopes that objectives will be better respected in the next few years.

(Country Focus. 05. March 2004. Brussels. 7pp. Tab. Graph. Free.)

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