As Belgium has recently been called out by EU regulators over its excessive deficit, the State's High Council on Finance has said it is an "excellent opportunity" to reform the country's spending framework – including by introducing clear rules for all regional and community budgets, and possible sanctions if those rules are broken.
New EU budgetary rules approved in April allow the European Commission to trigger an excessive deficit procedure for countries with public debt in excess of 60% of gross domestic product (GDP) or whose annual spending deficit exceeds 3% of GDP.
Latest Eurostat figures show that Belgium's budget deficit stood at 4.5% of GDP in the first quarter of 2024, while the country's total public debt stood at 108.2% of GDP. Unsurprisingly, Belgium is one of seven Member States which the Commission has proposed should be subject to an excessive deficit procedure.
To enable Belgium to bring its budget spending back within the EU limits (meaning public debt at 60% of GDP and a deficit of 3% of GDP), the European Commission has drawn up a "reference path". This suggests how the situation can be improved over a four-year "fiscal adjustment period" (which can be extended to seven years in certain situations).
It is now up to the Belgian State to incorporate the Commission's suggestions into a mid-term budgetary structural plan, which will lay out national expenditure over the next five years. This must be submitted to the Commission by 20 September.
However, this EU procedure only examines overall national spending. In March, the Federal Government therefore asked Belgium's High Council on Finance how the effort to comply with new EU budget rules should be shared between the country's numerous regional and community parliaments.
While Belgium has been slapped on the wrist at the EU level for its debt and deficit woes, the regional managing of budgets has also led to tension and division, even fuelling calls by right-wing nationalist parties for Flemish independence.
Sharing the budgetary burden
The High Council on Finance examined how the budget plan could be divided up between the Federal Government as well as other entities in charge of spending: the Walloon Region, the Brussels-Capital Region, the Flemish-speaking Community (which also manages the Flemish Region), the French-speaking Community, the German-speaking Community, and the Common, French and Flemish Community Commissions.
Rather than assessing each entity's share of Belgium's total expenditure or total revenue, the Council suggested that the sum of both should be used to calculate how each entity should contribute to reducing the national debt and deficit. However, it said "political decision-makers may consider a different weighting of expenditure in relation to revenue if they see fit."
The Council emphasised that the starting point for Belgium should be to "ensure the sustainability of the public debt of each individual entity," an approach which it said is "in line with the philosophy of the European Commission for Belgium as a whole."
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The new EU budget rules are an "excellent opportunity to revise the Belgian budgetary framework," according to the Council, which made a number of recommendations.
Among them, the Council said that if regions and communities cannot come to agreement with each other about the five-year spending plan, a "binding intra-Belgian budgetary framework" should be drawn up with rules for each entity. This can be assessed by a strong and independent budgetary institution, such as the High Council itself.
It also called for regions and communities to draw up multi-annual budgets, to closely monitor revenue and expenditure, and to make uniform budgets aligned with EU formats.
To make budgetary rules more binding, the Council also said it would be necessary to "envisage sanction mechanisms that would come into force if an entity allowed its public finances to get out of hand."
The Council said that its suggestions should be legally anchored in a new co-operation agreement, to replace the current one drawn up in December 2013 which was based on old EU budgetary rules, and which "has not, in practice, sufficiently led to a sounder fiscal policy."
