EU increases pressure on Belgium

23rd November 2011, Comments 0 comments

The Finnish European commissioner for Monetary Affairs Olli Rehn will present the Annual Growth Survey 2012 together with the president of the European Commission José Manuel Barroso today.

This document puts more pressure on all EU member states to incur structural changes and does not only apply to Belgium. The liberals, who feel the socialist formateur Elio Di Rupo does not make sufficient concessions to meet Europe’s recommendations, will undoubtedly use the survey to increase pressure on the other negotiating parties socialists and Christian democrats.

The Commission has proposed a series of measures for 2012, among them a number of thorny issues that have also been debated during the government formation talks. The first one is job market reform and the need to address a balanced form of flexicurity the job model that attempts to reconcile flexibility and job security and unemployment among the youth. Secondly the need for reforms in the public sector must be addressed.

Moreover the European Commission has called on member states to update their pension systems, “The sustainability of the pension system must be secured. The pensionable age must be adjusted in keeping with increased life expectancy; longer careers must be stimulated and early retirement and advanced retirement schemes must be limited,” it states. Rehn yesterday issued another warning to Belgium which, like Cyprus, Hungary, Malta and Poland, has failed to closely adhere to European budgetary regulations.

Europe has given our country until mid-December to indicate that the budget deficit will drop below 3% next year. If not, the Commission could propose penalties amounting to 0.2% of the GDP, which is 708 million euros. Meanwhile Belgian interest rates have shot up to an alarming 5.1%, which implies that the country will pay more than provided on new loans,  which may cost the treasury hundreds of millions of euros.

Anne Leclercq of the Debt Agency sees the situation as alarming and believes that the past weeks have seen Belgium infected by France, which has been under considerable pressure in the financial markets.

“Although the crisis in the Eurozone is the main reason for the increasing interest rate, the breakdown in government negotiations has caused confidence to drop,” says Leclercq, adding: “We can only wait on the bazooka a massive ECB intervention, ed. to solve the crisis in the Eurozone. We cannot do anything ourselves. But something has to happen, otherwise the system will fail. Under the current circumstances we will be better off with a government which can draft a budget that is in line with European recommendations.”

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