The European Commission has issued a scathing assessment of Belgium's 2024 budget plan, claiming that the country's policymakers have made only "limited progress" in implementing the bloc's previous fiscal proposals.
In a report published on Tuesday, the Commission noted that Belgium is just one of four EU Member States (together with Croatia, Finland, and France) whose budget plans for 2024 "risk being not in line" with recommendations issued by the European Council in July.
The Commission ruled that "Belgium has made limited progress" in addressing fundamental elements of the fiscal recommendations made by the Council on 14 July 2023. It consequently urged Belgian authorities to accelerate progress.
The Commission took particular issue with Belgium's "winding down" of energy support measures (introduced after Russia's invasion of Ukraine in February 2022), which will partly finance additional government expenditure rather than address the country's soaring deficit.
The costly energy support measures are due to finish "as soon as possible in 2023 and 2024" – a decision welcomed by the Council. But the cost saving that stopping these payments represents will instead be allocated elsewhere, rather than used to reduce the government deficit. On this point the report was critical.
Overall, the Commission forecast Belgium's budget deficit will remain unchanged at 4.9% of annual GDP next year. At the same time, its government debt-to-GDP ratio will rise to 106.4% – well above the EU's deficit and debt thresholds of 3% and 60% respectively. These were suspended at the start of the Covid-19 pandemic in 2020 but are set to re-enter into force next year.
'Uncertainty and risks have increased'
In a separate report that analysed the draft budget plans of all 27 EU Member States, the Commission predicted that Belgium will be one of just eight EU countries that will run a deficit of more than 3% of annual GDP in both 2023 and 2024. (The other countries are Spain, France, Italy, Latvia, Malta, Slovenia, and Slovakia.)
The Commission also forecast that Belgium will be just one of five Member States whose debt-to-GDP ratio will exceed 100% next year. (The other countries are Greece, Spain, France, and Italy.)
Citing external tensions, notably Russia's continuing aggression in Ukraine and the current conflict between Israel and Hamas in the Middle-East, the report stressed that public spending might be forced to rise more than is currently projected if energy markets are hit again. Were this to happen, Belgium would plunge even deeper into debt.
Related News
- Belgian economy will be among the worst in Europe, says IMF
- Belgium faces soaring debt levels with financial stability under threat
The Commission also warned that natural disasters induced by climate change and repeated interest rate hikes over the past year by the European Central Bank could have a similarly negative impact on public finances.
"The transmission of monetary policy tightening may weigh on economic activity for longer and to a larger degree than projected in this forecast, as the adjustment of firms, households and government finances to the high interest rate environment could prove more challenging."
It highlighted the "intensifying impact of climate change" and in particular "the extreme weather conditions and unprecedented wildfires and floods in the summer" as externalities that Europe must be ready for, though their unpredictability makes them difficult to factor into economic forecasts.
