The Brussels-Capital Region Government has agreed to make substantial cuts in next year's budget, with local ministers warning that the city should prepare for even more serious belt-tightening over the next few years.
The budget, announced by Brussels Minister-President Rudi Vervoort late on Sunday evening, followed two weeks of intensive negotiations among city officials.
Opinion was split between liberal parties, led by Finance Minister Sven Gatz (Open VLD), who pushed for savings of up to €600 million, and other predominantly progressive groups that urged less extreme spending reductions. €200 million worth of cuts were eventually agreed.
Accord sur le budget #brugov ! Face à une situation budgétaire compliquée suite aux crises, nous adoptons un budget responsable. RBC & COCOM se donnent les moyens de poursuivre leurs pol. environnementales & sociales: #mobilité #logement #emploi #santé. Merci à tous mes collègues pic.twitter.com/SM2lTKUDnT
— Rudi Vervoort (@rudivervoort) October 15, 2023
Tweet translation: Agreement on the #brugov budget! Faced with a complicated budgetary situation following the crises, we are adopting a responsible budget. RBC & COCOM are giving themselves the means to pursue their social environmental policies: mobility, housing, employment, health. Thank you to all my colleagues.
"The negotiation was hard, especially on Saturday, but we were able to find the necessary composure to succeed," Gatz told Belga News Agency. "The return to balanced budgets... is therefore well and truly underway."
Gatz elaborated that the new budget will include savings of up to 3% in staff costs, while operating expenditure will be reduced by 5%, business subsidies by 8%, and investments by 10%.
However, Gatz warned that the new budget represents just the first step towards restoring the city's fiscal health. "We're not out of the woods yet, and serious savings will be required in the coming years," he said.
Brussels Finance Minister Sven Gatz. Credit: Belga / James Arthur Gekiere
According to l'Echo, the new agreement means that the city's total deficit will reach €950 million next year. Brussels' debt-to-GDP ceiling will also be increased to 210%, instead of 205% as initially desired by Gatz. The city's current debt-to-GDP ratio is 190%.
Waffling in debt
The new budget comes amid the capital's skyrocketing levels public debt. Since 2018, Brussels' public debt has nearly tripled, from €4.7 billion to €13 billion today.
Moreover, a recent analysis by economists at the University of Namur forecast that, without radical budgetary adjustments, the capital's debt will rise a further 50% (to €19.4 billion) by 2028.
Last month, former Auderghem mayor and current Brussels MP Christophe Magdalijns of DéFI (a centrist Brussels-based French-speaking party) warned that Brussels is "falling into bankruptcy", adding that "if nothing is done, the city will experience its worst ever budgetary and financial crisis".
The city's mounting debt also comes against the backdrop of a deepening fiscal crisis across the rest of Belgium. According to the Eurostat, the EU's official statistics office, Belgium's total government debt-to-GDP ratio of 107.4% is the sixth highest in the bloc and nearly twice the EU's 60% legal threshold.
However, even relative to the rest of Belgium, Brussels' debt crisis is particularly severe. The Institute of National Accounts (l'Institut des comptes nationaux) recently reported that between 2018 and 2022 the public debt in Brussels grew one-and-half times faster than in Flanders and two times more rapidly than in Wallonia.
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Brussels' budget announcement also comes the week after the Federal Government revealed its own budget for 2024, which introduced highly controversial reforms to Belgium's labour market and healthcare sector.
Despite the new measures, experts predict that Belgium will almost certainly violate the EU's deficit ceiling of 3% relative to GDP next year.
Worryingly, Belgium's failure to comply with the EU's fiscal constraints in 2024 could mean that the country will be forced to implement even more severe budget cuts in 2025. Under new rules proposed earlier this year by the European Commission, Member States that run deficits greater than 3% of GDP will be required to trim their budgets by 0.5% per year until they fall below the 3% threshold.
