Central government backing
In 1996, France decided to manage its negotiable debt separately from its social debt, and over the years French laws have repeatedly affirmed this distinction. In late 2007, for the first time, a minister with overall responsibility for public accounts oversaw the joint preparation of the Budget Act and the Social Security Finance Act.
The solvency and liquidity of CADES are guaranteed under Article 7 of the government order of 1996, which specifies that “if the Fund’s annual forecast revenue and expenses over the remainder of the term for which it was established show that it will not be able to meet its commitments, the Government shall submit to Parliament the measures necessary to ensure that interest and principal payments are met”.
The State has ultimate responsibility for ensuring that CADES remains solvent, pursuant to the Act of 16 January 1980 on the enforcement of decisions by public law legal entities. Court-ordered administration and liquidation procedures do not apply to public agencies (under Article 2 of the Act of 25 January 1985 on company bankruptcy procedures) and if a public agency is dissolved its assets and liabilities will be transferred to the public body or authority that created it (the State in the case of CADES). French law also ensures that CADES has sufficient liquidity. Until 2006, the French government could grant national public agencies a cash advance whenever necessary to ensure that they have sufficient operating funds. The government even has an obligation to do this if a court determines that the public agency lacks sufficient credit (pursuant to the Act of 16 July 1980). These advances are granted from a specific French Treasury account. Since the 2007 Budget Act, the granting of these cash advances has been modernized, simplified and explicitly provided for in the “balance article” of the Budget Act; liquidity now being assured by the government debt redemption fund or directly by Agence France Trésor, through the purchase of commercial paper.