The setbacks in the federal budget could hide in the small figures
Following a marathon of nineteen hours of negotiations from Friday evening to Saturday afternoon, the six negotiating parties have finally reached an agreement on the 2012 federal budget. At the same time they managed to round up a budget path for the next few years to make a balanced budget possible by 2015. Key to the budgetary process was the insistence on a political balance, and up to the last minute millions of euros were shifted and dates advanced for the implementation of measures. Even the systems for additional levies such as wealth tax were adjusted in the last hours. At a glance the new budget seems to contain two major potential setbacks: firstly a possible overestimation of growth prospects, which remain set at 0.8% of the GDP. Economists believe this could become a gross overestimation and even Premier Yves Leterme CD&V has expressed concern in this respect during the past weeks. Should economic growth come to a standstill, the unfilled gap in the economy will be even more than the current 11.3 billion. The second possible threat to the new budget’s success could be the underestimation of the interest rates. With a current long-term interest rate of more than 5% that threatens to increase to as much as 6%, Belgium could face a higher bill in future. European Commissioner for Economic and Monetary Affairs Olli Rehn welcomed the coalition agreement in a press release. During recent weeks he threatened more than once to impose penalties if the federal government failed to finalise its budget on time. Rehn’s spokesperson Amadeu Altafaj did mention, however, that this was the Commissioner’s initial response and that the final budgetary measures will be subject to further investigation before a final opinion is given. Rehn further took note of the structural measures in the agreement, with respect to fiscal discipline and improved competitiveness. These measures should meet the Commission’s six socio-economic recommendations made in June and approved by the Council of government leaders. Altafaj stressed the importance of the recommendations, saying: “Budgetary measures on their own are not enough. Without economic reforms the crisis will not be solved.” The Commission’s recommendation on index reform was dismissed by the negotiating parties and it was decided to leave the index untouched. On Saturday evening this decision caused its first stir when Open VLD president Alexander De Croo announced his intention to check the National Bank’s study on the index. PS party president Paul Magnette decided to “honour the positive atmosphere among the coalition partners” and to refrain from commenting on De Croo’s statement. “All that matters is the content of the agreement,” he concluded. Meanwhile the six parties plan to investigate possible measures to reconsider the role of energy prices in the index. According to liberal negotiator De Croo, the lack of an index adjustment will not keep the Belgian budget from passing the European test “with distinction”.