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Federal government discusses ‘recovery’ and balancing the books

The Belgian Cabinet met last Sunday to discuss the ongoing recovery plan as well as the need for further deficit reduction. The Federal Government remains committed to the terms of the Belgian Stability Program and is negotiating additional ways to find savings. 

To maintain a budget deficit of -2.8%, Belgium will have to find at least an additional €78 million in savings. Maintaining strong fiscal discipline will lead to lower interest rates and reduce the borrowing costs for the Belgian Government as we have witnessed in the last couple of months.

The Belgian Stability Program sets out the fiscal policy stance of the Belgian Government for the period 2012-2015. Based upon recommendations by the European Commission, the Program aims to maintain a budget deficit below -2.8% in 2012. The Monitoring Committee determined that in order to maintain that target, Belgium will have to find additional savings of €78 million. A further €25 million will also need to be found due to extra fiscal support for Greece.

In any case, this latest deficit-reduction exercise pales in comparison to the €13 billion in savings agreed upon earlier this year. The Minister of Finance, Steven Vanackere, urged participants in the budgetary talks to resist the temptation to make new expenditures, as these would necessarily need to be offset by cutbacks in other areas. Nevertheless, several Ministers have come forward with new spending plans.

Laurette Onkelinx (Minister of Social Affairs) wants €15 million for the reform of mental healthcare and to aid ambulance services. Annemie Turtelboom (Minister of Justice) requested an additional €36 million to ensure sentencing will be carried out. Where cuts will fall to offset these new spending plans has not yet become clear.

The Cabinet is also discussing the new economic recovery plan. A commitment across the political spectrum has been made to ensure the new measures are budgetary neutral. Johan Vande Lanotte (sp.a) believes the recovery should cost ‘as little as possible’. At a cost of €12 million for the fiscal year of 2012, Didier Reynders hopes to boost employment by reducing employer’s social security contributions for SME’s first three hires. Reforms in the hospitality sector, company internships for young people and tax reductions for the elderly are also on the table. A spokesperson for Prime Minister Di Rupo indicated that discussions have been constructive so far. Talks are expected to continue until the end of this week.

AmCham Belgium’s Position

AmCham Belgium believes a healthy macroeconomic environment is important if Belgium is to continue attracting foreign investment. Strong fiscal discipline will lower borrowing costs for Belgium at a time when Eurozone borrowing costs are continually in danger of spiraling out of control. As such, AmCham welcomes the recognition that any recovery strategy will be the most successful if it remains budgetary neutral. To read more of our recommendations for Belgium, please consult our Priorities for a Prosperous Belgium 2012.