Fitch: Social Spending and Cuts in State Transfers Pressure French Departments' Finances

Fitch Ratings says that French departments' finances have been under pressure in recent years from growing social spending, especially social benefits and social inclusion, and cuts in state transfers since 2014. This has led to a gradual deterioration in departments' budgetary performance since 2012.

Estimated figures show a stabilisation in departments' budgetary performance in 2016 thanks to a sharp increase in tax revenue, supported to the dynamism of the real estate market and the use by many departments of their tax leeway, and strict control of their current expenditure.

However, Fitch considers that deterioration in departments' budgetary performance is again likely in 2017 as tax revenue growth is unlikely to offset continued cuts in state transfers and upsurge in current expenditure.