Belgium's Federal Government is set to agree on the next financial budget for the next two years within the upcoming days, Prime Minister Alexander De Croo stated he plans to reduce the budget deficit by €1.7 billion more than previously planned.
According to Belgium's Planning Office, the country has a budget deficit of €31.5 billion, with internal sources confirming that De Croo is seeking to reduce that deficit by an extra €1.7 billion by 2024, the equivalent of 0.3% of GDP.
De Croo (Open VLD) recently had the first round of talks with his ministers to prepare for the budget discussions this weekend.
By mid-October, the EU will require Belgium's budget plans for 2023, but the government is facing various challenges which appear to be slowing down the process.
Keeping the budget deficit below 3%
In the discussions, Belgium's coalition government agreed on an annual 'fixed' rate of 0.2%. Depending on economic growth, a 'variable' effort could be included. However, as growth is slow due to various crises, that figure is limited to 0.15% per year for the next two years.
The budget deficit would then be reduced by €4 billion in 2023 and 2024, so the government would end its term with a deficit of just over 3%. The figure is important because according to the Maastricht treaty, European Member States need to have their budget deficits below 3%.
That condition has recently been loosened due to the onslaught of successive crises faced by struggling citizens, but the Prime Minister wants to show that Belgium is on track toward a credible fiscal plan to keep markets at bay and attempt to close in on the EU standard.
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In addition, the Prime Minister has been keen to draw up budget plans for two years because 2024 could be without a budget due to the upcoming elections.
Yet negotiations in the coming week may prove difficult. One aim is to review the social tariffs. In addition, energy will be a central matter including a reform of the VAT on electricity, although it is unclear that this will be achieved.
The government wants to convert reduced VAT into excise duties, which will be up to Energy Minister Tinne Van der Straeten (Groen) and Finance Minister Vincent Van Peteghem (CD&V).
