Belgium will cut again if needed, vows PM-to-be

27th November 2011, Comments 1 comment

Belgium's incoming leaders insisted Sunday that they will do whatever is required to keep their public finances healthy, even if drastic Italy-style action is ordered by the EU and the IMF.

As the country awaits the reaction on bond markets to 11.3 billion euros ($15 billion) of budget cuts for 2012, premier-to-be Elio Di Rupo said Belgium faces a "different reality," as it tries to end a world-record impasse of 19 months without a new government since elections.

However, he underlined that the deal agreed in marathon talks following a Friday night decision by Standard & Poor's to downgrade the country's credit rating showed that "Belgium is capable of tackling not only the current demands, but all situations" that might emerge.

Governments across Europe have had to reassess their 2012 budgets with experts from the IMF to national data-crunchers almost all now predicting a more severe recession in 2012 than initially suspected, and Italy joining bailed-out Greece and Portugal in having to cut more than planned.

Asked if radical further measures could be applied despite "gigantic" cuts amounting to "the biggest in Belgium's history," Socialist Di Rupo replied that they would "if things take a turn for the worse in neighbouring countries or the global financial picture."

EU Economy Commissioner Olli Rehn, who has threatened sanctions, said he wanted to see the budget enacted into law by parliament "very soon"

Party colleague and deputy prime minister in Yves Leterme's outgoing caretaker cabinet, Laurette Onkelinx added that the budget was also "a direct message to the IMF," saying it offered "rigour, but not austerity."

Di Rupo was joined at a press conference by the leaders of five other parties who are bidding to have their coalition government sworn in by next weekend -- after the parliament votes on the budget in the coming days.

The big absence was Bart De Wever, the nationalist leader of the Flemish N-VA, the biggest vote-grabber in elections, who controls the largest bloc of seats in the parliament and who dismissed the deal, in the Dutch-language media, as containing "nothing positive."

"This will be a minority government for Flanders imposing cuts that a majority of Flemish will have to pay for," De Wever said, setting the scene for a turbulent debate in the chamber.

He described the package as high on tax rises, and therefore low on spending cuts in a country with multiple layers of government given official Flemish, French, bi-lingual and even German-speaking parts.

As a result, "the climate for investment in the country will deteriorate considerably, and it will only have limited impact on the interest rates Belgium will have to pay" on commercial money markets.

The package as presented was thin on detail, but Di Rupo talked of a tax on property earnings that is expected to contribute nearly a billion euros in revenue.

Another tax will be levied on stock windfalls for companies investing in shares, while workers will have to stay on longer before taking early retirement and the length of time where people can claim unemployment benefit will be shortened.

Di Rupo also said he would take special action to combat energy price rises, in a nod to unions which have called a national protest on December 2.

The country's employers federation, for their part, said the deal had still not addressed Belgium's index-linked salary increases, which they pinned as one of the main liberal reforms demanded by the European Union.

More than 500 days into the national struggle to craft a workable government, Belgium's 2012 public deficit will fall to 2.8 percent of gross domestic product (GDP) if the planned measures are respected and if the wider economy does not reserve fresh surprises.

© 2011 AFP

1 Comment To This Article

  • Jim Steele posted:

    on 28th November 2011, 11:44:31 - Reply

    Amazing isn't it. The fix to any problem is to garner more tax revenues be it income or investment related.
    Do we ever hear of governments "improving efficiencies" or reducing public servants????
    No, lets just tax more.
    Not the way to run a business. In private enterprise you would be OUT of business!