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Belgium to apply new round of budget cuts

Belgium’s government on Saturday announced a new round of budget cuts, amounting to 1.43 billion euros ($1.83 billion), under pressure from the European Commission to set a new public deficit target.

The new target for the public deficit — the shortfall of state revenue to spending — will be 2.4 percent of Gross Domestic Product in 2013, as opposed to an earlier target of 2.15 percent of GDP.

Most of the spending cuts will be made in the public, defence and development sectors. Other measures include price hikes for tobacco and health care.

The decision comes after days of negotiations by the coalition government led by Socialist Prime Minister Elio Di Rupo.

“We have an agreement on the budgetary control, maintaining maximum purchasing power and strengthening our economic fabric, particularly in SMEs (Small and Medium-sized Enterprises), which will help us get out of the crisis,” Di Rupo told a press conference.

The government also wants to boost investments in SMEs by reducing the tax on dividends.

On Wednesday, the International Monetary Fund urged Belgium to reform its economy, warning that it is likely to eke out growth of 0.2 percent this year.