Brussels demands Belgium pare 2012 budget

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The European Commission has rejected Belgium's 2012 budget as over-optimistic and is demanding it shave an extra 1.2 to 2.0 billion euros to avoid breaching the three percent threshold.

In a letter sent Thursday to Belgian Finance Minister Steven Vanackere, the EU's Economic Affairs Commissioner Olli Rehn said his services "have come to the conclusion ... the deficit forecast for Belgium in 2012 should be updated to about 3.25 percent of GDP".

Belgium's new government should in consequence "in the coming days" agree to pare down the budget by about 1.2 to 2.0 billion euros, he said.

"This would allow us to conclude ... that Belgium has undertaken the required fiscal effort," he said, calling on the country's new government to inform the Commission of its response "by the end of the week, latest by Monday morning."

Under new rules agreed in December that give the EU executive added powers to enforce budgetary discipline, infringement of the three percent deficit ceiling can set off a quick train of action including fines and judicial penalties.

The Commission late last year singled out Belgium and four other European Union nations -- Hungary, Poland, Cyprus, Malta -- as possibly failing to meet the target. It will issue a statement on January 11.

Belgian Budget Minister Olivier Chastel said on national radio that the centre-left coalition that took office last month had been involved in budgetary talks with the Commission over the last two weeks.

The budget, based on 0.8 percent growth, forecasts a 2.8 percent deficit after sweeping cuts of 11.3 billion euros aimed at avoiding a no-policy-change deficit that could have run up to 4.6 percent of GDP.

But Commission experts believe Prime Minister Elio Di Rupo's government has been over-optimistic on expected savings, notably in healthcare, and on expected revenues from the fight against tax evasion.

© 2012 AFP

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