A reform of EU fiscal rules agreed by European Finance Ministers on Wednesday could force Belgium to implement budget cuts totalling €30 billion over the next four years.
The current rules – which were suspended during the pandemic and energy crisis but are set to re-enter into force next year – require EU Member States to maintain budget deficit and debt levels of 3% and 60% of annual GDP respectively.
Belgium's deficit and debt levels are well above these thresholds, at 4.9% and 106.3% respectively.
The agreed reforms maintain the 3% and 60% limits but also introduce further stringent requirements for countries which exceed them.
In particular, Member States with debt levels above 90% of GDP will be required to reduce their debt by at least 1% of GDP each year.
Furthermore, non-fiscally compliant countries must propose a four-year plan to the European Commission showing how their deficit and debt levels are "on a plausibly downward trajectory." (The plan's duration can be extended to seven years under certain conditions.)
Spanish Economy Minister and future European Investment Bank chief Nadia Calviño said in a statement that the reformed rules would "ensure balanced and sustainable public finances and the protection of investment, growth and job creation throughout the EU."
Spanish Economy Minister Nadia Calviño. Credit: EP Photo
"We are convinced that the new rules will be effective, support the EU's objectives and dramatically improve our existing framework," she added.
According to estimates published by L'Echo and De Tijd, the reforms imply that Belgium will likely have to cut its annual budget by €7 billion – or approximately 1.25% of GDP – over the next four years.
"The absence of budgetary discipline in recent years makes the restructuring of Belgian public finances imposed by Europe extra difficult," wrote De Tijd columnist Stefaan Michielsen. He added that Belgium's heavy public spending to protect households and businesses during the Covid-19 pandemic and energy crisis was "insufficiently selective and lasted too long."
Michielsen further suggested that the next Belgian Government, which will assume power after the 2024 elections, will find it especially difficult to address Belgium's "major" long-term fiscal challenges, including soaring pension costs and climate change-related expenditures.
"The coming government will have an extra hard time because policymakers have not been sufficiently disciplined with public finances in recent years," he wrote.
'A fundamentally bad proposal'
By contrast, workers' groups focused much of their ire on the reforms themselves, rather than Member States' alleged fiscal profligacy.
"This deal is bad news for millions of working people struggling with the cost of living," said European Trade Union Confederation General Secretary Esther Lynch.
In her view, the "fundamentally bad proposal" would "leave Europe chasing savings at a time when we need to be increasing public investment to achieve a just transition to a green and digital economy."
"Europe needs fiscal rules which put the wellbeing of people ahead of arbitrary limits based on discredited ideology from the 1980s."
