Belgium should push for the maximum seven-year time period to tackle its overspending under EU budget rules, the Central Economic Council (CEC) has recommended.
The Belgian State is in the middle of an excessive deficit procedure launched by the EU regulators in July. Belgium is one of seven EU Member States under fire for overspending, as its annual budget deficit and growing overall debt are beyond acceptable limits set by EU law. The other countries are France, Italy, Hungary, Malta, Poland, and Slovakia.
Belgium is facing a budget deficit of 4.4% of GDP (gross domestic product) and public debt reaching 105% of GDP in 2024. This is beyond the thresholds set by EU rules, which require governments to limit their deficits to 3% of GDP and public debt levels to 60% of GDP.
Belgium's incoming governments face the major task of deciding how to reduce the budget by around €28 billion in the coming years, either by cutting spending or increasing government income.
Extend from four to seven years
Belgium has until 31 December (having already extended a September deadline) to submit a multi-year budget plan to the European Commission detailing how it will reduce its spending over a set "fiscal adjustment period".
The standard fiscal adjustment period is four years but a Member State can extend this to seven years if it carries out reforms and investments that "improve resilience and growth potential, support fiscal sustainability and address common EU priorities, such as the green and digital transitions, energy security or the build-up of defence capabilities".
The CEC, in its latest report on the state of Belgian public finances, "strongly" recommends that Belgium opt for the seven-year adjustment period. "A longer period would allow budgetary efforts to be better spread and avoid abrupt cuts that could weaken key sectors of the economy," the council said.
A four-year budget plan would require Belgium to cut spending by around 1% of GDP per year, while a seven-year plan would require savings of 0.8% of GDP per year. Cumulative savings by 2029 would amount to 4.4% of GDP, or €31.4 billion, in a four-year trajectory, and 4.0% of GDP, or €28.5 billion, in a seven-year trajectory.
Linking environmental and economic policies
The council stressed that if Belgium opted for the seven-year adjustment period which requires additional reforms and investments, Belgium will have to integrate climate and energy objectives into economic policies.
"A credible National Energy and Climate Plan could play a key role in securing an extension of the adjustment period to seven years, enabling Belgium to better respond to budgetary and environmental challenges," it said.
It added that Belgium should also "significantly" increase public investment in order to boost productivity, something that has also been emphasised in the Draghi report on EU competitiveness published in September
The CEC also called for better coordination between the various Belgian authorities to ensure that budgetary efforts are distributed fairly between the different regional and language governments.
