Following on from its publication of 'Local authority finances in the fifteen
countries of the European Union' which presents a detailed comparative analysis
backed up by monographs for each country, Dexia today presents an update of
The main trends apparent between 1996 and 2001 continue to hold good:
- The essential role played by local authorities
Local authorities in the European Union spent 987 billion euros in 2001, or
11.2% of European GDP. That percentage rises in countries that are going through
a process of devolution - such as Italy and Spain.
The role played by the public sector at local authority level is particularly
important when it comes to investment. In 2001 that amounted to 134 billion
euros - or 66.1% of all public sector investment in Europe.
- Local authority finances still in fairly good shape even though circumstances
have become more difficult
Since 1997 the local authority sector in Europe has on the whole produced budget
surpluses as a result of pursuing policies designed to put an end to public
sector borrowing and public sector budget deficits.
However a slight downturn was observed in 2001, when the aggregate budget surplus
by local authorities dropped to 4.1 billion euros from 5.1 billion euros in
2000. That trend is likely to continue in 2002 because of the decline in the
economy and the fall in local tax revenues in certain countries, notably Germany.
The update also makes it possible to compare the position of local authorities
in Belgium with those in other European countries:
- Spending by local authorities in Belgium (16.6 billion euros in 2001, i.e.
6.5% of the country's GDP that year) is below the European average (11.2%
GDP). This is partly the result of the greater powers exercised by the local
authorities in other counties (where they are responsible, for instance, for
paying teachers and running hospitals), and partly due to Belgium's federal
structure: certain powers which lie with the Regions or the Communities are
exercised in other countries by the local authorities.
- Investment by the local authorities (2 billion euros in 2001, or 0.8% GDP)
is also below the European average (1.5%). This too is due to the federal
structure of the country: investment by the Regions and the Communities (1.5
billion euros) is about the same as that by the local authorities and the
provinces. Furthermore this is the ratio for 2001, a year after the elections
when traditionally investment is low. Even so, compared with other federal
states (Germany and Austria), local authority investment in Belgium in 2001
(0.8 % GDP) was at around the same level as Austria (0.7% GDP).
- Tax revenue by the local authorities in Belgium is not very high, representing
2.1% GDP (as opposed to 4.2% in Europe) and 500 euros per inhabitant (as opposed
to 1,000 euros at European level). The differences with the other countries
is due in particular to the high level of tax that the local authorities are
able to raise in certain countries like Spain and Italy - two countries where
substantial powers have been devolved to the regional authorities along with
the transfer of powers to raise taxes.
- In 2001 the aggregate local authority budget closed on a slight deficit
(-0.3 billion euros, or -0.1% GDP). Belgium is therefore close to the European
aggregate, a very slight surplus of +0.05% GDP. In 2002, the aggregate local
authority budget also showed a slight surplus.
- Local authority public sector debt in Belgium amounted to 15 billion euros
in 2001 or 5.8% GDP. This is close to the European average of 5.6% GDP that
year. It is worth bearing in mind that Belgian public sector debt has been
falling since 1996 (when it was equal to 7% GDP).