Brussels (Brussels Morning) – Belgium faces a major challenge with the European Union’s Excessive Deficit Procedure. It balances fiscal responsibility with investments in green and digital transitions amidst caretaker governance and multi-level government complexities.
The triggering of the extreme deficit procedure for Belgium will raise a “very big” challenge for the State, as it cannot trim public spending at the cost of the green and digital transitions, the head of the Central Economic Council (CEC) has stated.
Last week, the European Commission offered that an Excessive Deficit Procedure (EDP) should be placed in place for Belgium and six other Member States that are not fulfilling minimum EU budgetary requirements. The procedure will direct Belgium to reduce its obligation by at least 0.5% of GDP per year, either by trimming spending or boosting tax revenues.
What are the implications of triggering the deficit procedure?
Benoît Bayenet, President of the Central Economic Council (CEC) said that lowering Belgium’s budget deficit will “not be as straightforward as just reducing expenditure,” as the government has increasing investment needs from many different sectors. Bayanet was talking at a seminar, co-hosted by the CEC, which was one of the last events of Belgium’s European Council Presidency before it was handed over to Hungary in July. The seminar emphasised the role of dialogue with social and civil partners as the EU tackles the digital and green transitions while staying competitive.
What role do green and digital transitions play in Belgium’s budget?
“The challenge for the country is on one hand, to find a way to have tolerable public finances, and on the other to find a resolution to challenges of ageing, the climate transition, the digital transition, and also protection with conflict now at the frontier of Europe,” statedBayanet.
It is hoped that recommendations for all Member States matter to an EDP will be issued in the autumn, but the Commission fulfilled with the Belgian caretaker government for closed-door talks about the State’s spending trajectory.
How does caretaker governance affect fiscal decision-making in Belgium?
Bayanet indicated that another challenge for Belgium in negotiating with the EDP is the trouble of elections this year, as interim caretaker management cannot make big judgments about budget spending. “The problem in Belgium is that there is no administration. The first thing you must have is a government to determine the sustainable trajectory approach for public finances,” he expressed.
How does multi-level governance complicate Belgium’s fiscal policies?
“Then the second issue is that in Belgium only 50% of payment is at a federal level, so the federal government can’t decide alone. It could mean that the arguments in Belgium with different tiers of government will be very long,” he added.
How does the European Economic and Social Committee view fiscal adjustments?
Oliver Röpke, President of the European Economic and Social Committee (EESC), also expressed at the seminar. He stated that the new EU economic management framework, which includes the disproportionate deficit procedure, is a “tool to foster sustainable and inclusive growth”, and will “deliver Member States with more significant leeway in setting their own fiscal adjustment path”.
