UPDATEBelgium must save at least 12 billion euros in the coming years to bring the budget deficit below the European standard. This is stated in a new advice from the High Council of Finance. But PS is already closing the door on additional savings. “If some want extra efforts, it will have to come from taxes,” says PS Deputy Prime Minister Pierre-Yves Dermagne in an interview with ‘De Tijd’. N-VA hopes that Vivaldi “finally opts for a budget in order”.
The De Croo government has only just reached an agreement on the budget, but the alarm bells about our public finances continue to ring. According to the Federal Planning Bureau, our country is heading for a deficit of 5.7% in 2023, compared to 4% in 2022. The Monitoring Committee is more optimistic, but that body also assumes a deficit of 4.8% in 2023 and 5.4 % in 2028. The Planning Bureau estimates the debt ratio at more than 113% of GDP by 2026, the Monitoring Committee expects an increase to just over 111%.
According to the High Council of Finance, our country – the current Vivaldi government – must urgently reorganize. Depending on which scenario the governments prefer – that of the Planning Bureau or that of the Monitoring Committee – this means an additional structural effort of at least 0.7 percent to 0.9 percent of GDP per year until 2026, the Supreme Court calculated. With the current GDP, that is a restructuring of at least 12 billion euros, according to a report by the budget experts of the High Council of Finance.
But that already excludes PS. “If some people want extra efforts, it will have to come from taxes,” responds PS Deputy Prime Minister Pierre-Yves Dermagne in an interview with ‘De Tijd’. The French-speaking socialists then talk about a securities tax, taxes on shares and the liquidation bonus when a company is dissolved. “I want to repeat it again: I am not deaf and blind to our budgetary situation,” says Dermagne, “but let us recognize that we are in a better position than when we negotiated this government.” According to the PS member, we look for money “too often from the middle class and not from the very rich”.
LOOK. The De Croo government has only just reached an agreement on the budget
Why is the budget important?
Every year, Belgium has to submit its budget to the European Commission, which checks whether we are on track to meet their medium-term budgetary objectives. According to the Maastricht norm, the budget deficit may not exceed 3 percent of GDP and the national debt may not exceed 60 percent of GDP.
Although European budgetary discipline was suspended as a result of the corona crisis and the war in Ukraine and a reform of the stability and growth pact is in the pipeline, Belgium is far from complying with European rules. And time is running out, because in 2024 they will come into force again.
According to the Supreme Court, most of the restructuring should take place at the level of the federal government and social security. In October, the federal government set a net effort of 0.6 percent of GDP for 2023 and 2024 combined. During the March budget review, an additional, and hard-fought, effort of 0.3 percent was added. The High Council of Finance also warns that these are “minimal trajectories”, which do not contain buffers for unforeseen circumstances such as we have known in recent years. In other words, the aging of the population, the ongoing war in Ukraine or further interest rate hikes have not yet been taken into account.
In a safer scenario, the governments will clean up 2.9 percent of GDP between 2023 and 2026 with the center of gravity in 2024, when an effort of 1.6 percent would have to be made. According to the HRF, that trajectory is “the least risky” in the light of the European Commission’s assessment, because the debt ratio there has been stabilized since the first year.
N-VA: “Opt for a budget in order”
N-VA reacts critically to the budget trajectory of the current government. “Vivaldi should finally stop with those big words about her mini-agreements and finally opt for a budget in order,” N-VA MP Sander Loones responds on Twitter. “Otherwise, Prime Minister De Croo will provide a scoop next year: then, when Belgium becomes president of the European Council, he will have to reprimand himself”, it still sounds cynical.
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