The Federation of Belgian Companies (la Fédération des entreprises de Belgique) has recommended scrapping Belgium's almost unique system of automatic wage indexations by 2030.
In a press conference held on Monday, FEB CEO Pieter Timmermans argued that the current scheme of government-mandated salary hikes is unaffordable and is causing Belgium to become increasingly economically uncompetitive relative to its European neighbours.
He also suggested that the present system should be abolished before financial markets effectively force the Federal Government's hand.
"We can postpone the problem ad vitam aeternam [indefinitely]," Timmermans said, in comments reported by Belga News Agency. "But I want to avoid at all costs [a scenario in which] the financial markets have Belgium in their crosshairs. An intervention by markets would be the worst thing. Everyone would be the victim."
FEB CEO Pieter Timmermans. Credit: Belga / Jonas Roosens
"There are bugs in our system," he added. "Either we do a 'reboot' and restart it, or we don't do it and the system will crash."
Timmermans's proposal is likely to be fiercely resisted by trade unions. It is also likely to meet strong opposition from Belgium's two socialist parties (PS and Vooruit), both of which are members of the Federal Government's seven-party "Vivaldi" coalition.
One of the 'main risks' to the economy?
This is not the first time that Belgium's system of wage indexations has been criticised in recent months.
Earlier this year, the Organisation for Economic Co-operation and Development (OECD) – a group of mostly rich countries – vehemently condemned the scheme, arguing that it poses one of the "main risks" to the country's economic outlook by potentially inducing "more persistent inflation".
In a further echo of Timmermans' remarks, the OECD claimed that Belgium's high labour costs could precipitate "a loss of export competitiveness" over the coming months.
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Interestingly, Belgians themselves are overwhelmingly critical of their country's wage indexation system – albeit for entirely different reasons.
A survey conducted last year by Le Soir and other media outlets found that 73% of Belgians believe that the legally-enforced salary hikes constitute an inadequate safeguard against rising prices.
Many Belgian citizens are especially angered by the fact that wage indexations typically only occur after several months of high inflation have already passed, added with the general failure of such hikes to keep up with the actual rate of inflation.
According to the Federal Planning Bureau (FPB), Belgium's main economic forecasting body, wages and benefits will increase by 2% twice in 2024: social benefits are expected to rise by 2% in both April and October, and civil service wages in May and November.
Belgium's current wage indexation system was introduced in response to rampant inflation in the aftermath of the First World War. It is the only eurozone country besides Luxembourg in which both public and private wages are automatically indexed to inflation.
