European Commission: Belgium budget does not comply with EU rules

With its budget for 2023, Belgium is partially outside the European lines. This is what the European Commission states in its analysis of the draft budget submitted a few weeks ago. Against the agreements, our country is allowing primary spending to rise too high. The Commission rejects the automatic indexation of civil servants ‘ salaries and benefits, and also criticises the broad energy support. There will be no sanctions, but the Commission does ask Belgium to ‘keep those expenses within limits’.

For its analysis, the Commission relies on the policy recommendations adopted at European level, for which Belgium also gave its fiat. It was requested to implement a ‘prudent’ fiscal policy in 2023, which means that the growth in primary expenditure (i.e. without interest charges) must be lower than the expected economic growth. This is crucial for countries that already have a high level of debt. Just two weeks ago, the commission predicted that Belgium’s debt would rise to around 108 percent next year, while the budget deficit would clock in at 5.8 percent.

The Commission now finds that the Belgian budget only partially follows the European recommendations. Our country pursues a so-called expansionary fiscal policy, in which deficits increase. Not only is primary expenditure higher than forecast growth, but it is also not the result of energy aid to families and businesses and aid to Ukrainian refugees – reasons why the Commission has temporarily suspended the application of European budget rules.

As a result of this suspension, which allows member states to increase their deficit to more than 3 percent of GDP and does not have to reduce their debt ratio, Belgium does not have to fear sanctions. However, the Commission wants to consult with the government on ‘keeping within limits’ of primary expenditure, according to the Berlaymont building.

What is the reason for the growth of primary expenditure? According to the Commission, this has a lot to do with the automatic indexation of civil servants ‘ salaries, pensions and benefits. Also, as in most other member states, energy support is not targeted enough. “As we expect energy prices to remain high next year and support measures to be extended, those measures need to be urgently adjusted to avoid unnecessary pressure on public finances,” said Paolo Gentiloni, European Commissioner for the economy. In general, European countries should also encourage further reductions in the use of fossil fuels.

Specifically for Belgium, the Commission warns that an extension of current energy measures – such as the reduction in VAT for electricity, gas and heat, the reduction in excise duties on diesel and petrol and the extension of the social tariff until 31 March 2023-or the adoption of new measures will increase spending even more and thus also increase the budget deficit and the debt ratio. “It is therefore important that member states focus such measures more on the most vulnerable families and businesses,” it said.

In its analysis, the Commission notes that in 2023 only six Euro Area countries will have a debt ratio above 100% of GDP: Belgium, Greece, Spain, France, Italy and Portugal. But only in Belgium is the debt at risk of rising.

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