Financial crisis and rising taxes. A little Vaseline?

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Christophe
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Financial crisis and rising taxes. A little Vaseline?




by Christophe » 14/10/08, 18:36

Financial crisis. Towards a rise in local taxes?

One of the unintended consequences of the current financial crisis will likely be the rise in local taxes. Cities and departments have resorted in recent years to index-linked loans or exchange rates that the stock market storm is heckling dangerously.

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It is an open secret among the experts: a number of French local authorities have played with fire in recent years, underwriting high risk loans. Consisted at very advantageous rates, these so-called "structured" financial products have only one flaw. They are indexed on stock market indicators or currency exchange rates, according to complex formulas that only specialists master all the subtleties (1). And again ... Many bankers, in good faith, have presented as almost impossible evolutions that the current financial storm makes very likely. For the great misfortune of a number of municipalities or departments, which are likely to see their repayments fly.

The problem will not be inconsequential on local taxes. The structured products would indeed represent 25% of the total of the indebtedness of the collectivities (which was 137 billions of euros end 2007), with peaks to 50% for some cities! The situation of the latter is potentially explosive. This does not necessarily appear in their budgets, because structured products are often presented as conventional loans. It is not written that their rate is likely to fly one day depending on eg the exchange rate yen / euro, or even the interbank rate Polish day to day ...

Real speculations

Leaving aside the convolutions of language rigorous between financial, the rating firm Fitch Ratings has set foot in the flat in July 2008, in a note with the explicit title: "The structured debt of local authorities: active management or speculation? "

The study finds that cities, facing initial difficulties from the August 2007 crisis, have preferred to negotiate with their bank even more risky borrowings, simply to win 2 or 3 years before an increase in their maturities even more. considerable!

Comparing some communities to "pilots who would navigate without instruments," Fitch Ratings denounced "a real leap forward that could quickly be very dangerous."

"Do not generalize, says David Diano, director of Fitch Ratings International Public Finance Department. Large cities, departments and regions are usually run by competent officials who have been cautious. "

This is not always the case in medium-sized cities. Without naming, the firm cites the uplifting example of a community having "negotiated" a loan at 3,18% that could rise to ... 31% if the dollar went down in the next 10 0,5 2006. We are far from it, certainly. But who would have bet in 2 that the price of a barrel of oil would double in XNUMX years?

tax burden

Local governments on the verge of insolvency will probably have to increase the tax burden. They can not increase their indebtedness, and they will have to assume larger repayments than expected for outstanding loans. To make matters worse, because of the very pronounced slowdown in the real estate market, they will see drying up the resource of the transfer duties for valuable consideration. These represent 5% of the selling price of a good, shared between the departments (3,6%), the municipalities (1,2%) and the State (0,2%). These transfer fees have gone from 3,74 billion euros for 2000 homes to more than 11 billion in 2007, but they will inevitably fall this year and probably fall again next year. Even the city of Paris, whose financial situation is otherwise deemed healthy, confirmed in early October an increase of 9% local taxes in 2009, to offset the depression of real estate. This points to strong increases in taxation, in municipalities that will cumulate lower transfer duties and explosion of the time bomb of structured products!

Erwan Seznec

1. Of the "3,18% interest" type if the EUR-USD rate is lower than 1,44, and 3,18% + (100% - 1,44 / EUR-USD) otherwise.


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by bham » 15/10/08, 08:05

Go keep in the same register:
http://actu.orange.fr/articles/a-la-une ... pport.html
The budget of the Elysee "does not know the crisis", denounces a deputy PS in a report.
Great specialist in the budget of the Elysee, the deputy PS René Dosière presents Wednesday his annual report on the appropriations of the presidency of the Republic, where he denounces "the gulf between the promises of transparency and savings made by Nicolas Sarkozy and the reality".

These appropriations increase by 11,45% in the 2009 budget compared to the initial 2008 budget to reach 112,33 million euros, according to the Bercy document devoted to "public authorities" (Elysée, National Assembly, Senate, etc.) , which will be sent to Parliament this week.

"An increase of 11,5% is a very strong increase, 6,3 times greater than the state budget. At this rate, in five years, Nicolas Sarkozy will double the budget of the Elysee", storm M Dosière in a report entitled "The budget of the Elysee does not know the crisis".

The consideration of these credits in the Assembly is scheduled for November 13.
On the contrary, the Elysée assured Tuesday, in a press release, that its budget was "exemplary of transparency and good management" and that it actually increased by "2%".

False, answers Mr. Dosière, who denounces a "sleight of hand": "the presidency reinstates for 2008 9,2 million euros which will in fact be voted on during the budgetary collective, in December".

The deputy for Aisne insists on the "enormous increase" of 25,2% of operating costs (supplies, telecommunications, reception costs, etc.) and notes that the budget for travel expenses of the Head of State is up 33% compared to 2008.
The Elysee for its part underlines that the estimate of this last item for the 2008 budget was "made on the basis of the travels of the previous head of state (Jacques Chirac, editor's note) in 2006, whereas these have tripled between these two years ".

Regarding staff costs, which concern 1.031 people and constitute the main item of expenditure (70 million euros), Mr. Dosière affirms that they correspond to those "of a city of 100 to 150.000 inhabitants".

He also noted that the remuneration of the 98 contractual presidency progressed by "20% after 26,8% in 2008". "Decidedly, the president's collaborators do not know of any problem of purchasing power", he quips.

Above all, the elected PS wonders about the exact number of officials made available, whose costing resulting from the responses of the ministries is "approximately 150 less than that of the Elysee" (872): "despite multiple requests, I still don't know where these 150 + clandestine people came from ".

Mr. Dosière is finally surprised that the budget is "silent" on the acquisition, "which would nevertheless be signed" and that he considers "necessary, of an" Airbus 330-223 with Air Caraibes, which is expected at Sabena Technics in Bordeaux to proceed with its fittings "for the presidential trips.

"Never has the budget of the Elysee been presented in such an opaque and inaccurate way while it increases at an unusual rate in a period of recession. Under these conditions, the Elysee must review its copy," said the report.

Last year, when examining the appropriations allocated to the Presidency, the government had provoked a controversy by passing, in the name of "transparency", a last-minute amendment which more than doubled the remuneration of the Head of State, by aligning it with that of the Prime Minister.

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toto65
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by toto65 » 15/10/08, 20:31

on the acquisition, "which would nevertheless be signed" and which he considers "necessary, of an" Airbus 330-223 from Air Caraïbes

I learned today that for his trip to Guyana, they had used 7 airbus A330!
7 airbus is huge! Can someone confirm this info?
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