Europe puts Belgium and its excessive public deficit up against the wall: “Perhaps it’s a good thing”

In accordance with the provisions adopted at the end of April by the European Parliament as part of the new Stability and Growth Plan (SGP), Belgium will have to define in the coming weeks, with the help of the Commission, a “reference trajectory» supposed to allow it to adjust its budgetary plan, so as to reduce its deficit by 0.5% per year. According to the rapid estimates made by the outgoing Secretary of State for the Budget, Alexia Bertrand (Open Vld), this would represent for our country an effort of around 25 billion euros, or approximately 3.5 billion in savings. annual results that our country will have to carry out over the next seven years.

At the heart of the debates

Paradoxically, Bertrand Candelon sees “maybe a good thing» for Belgium in this news. The professor of international finance at UCLouvain explains: “This will force us to have a government that takes this into account“. And to remind: “For a year, many economists have been sounding the alarm on the catastrophic situation of the public deficit“. However, he believes, “the previous government did not realize the need to straighten out the public accounts».

In other words, the decision of the European Commission to open a budgetary adjustment procedure against Belgium “will perhaps refocus the political debate on the question of public spending», summarizes the professor.

Extended mission

Coincidentally with the calendar, royal informant Bart De Wever saw his mission extended this Wednesday for an additional week: after a first interim report submitted to the sovereign, a new opus is expected next Wednesday, June 26. As a reminder, the mission entrusted to the president of the N-VA was “aims to identify parties wishing to quickly form a stable coalition at the federal level and to identify its main political orientations“. There is no doubt that the announcement of the procedure initiated by the European Commission this Wednesday will impact the content of the upcoming discussions, which should once again concern the N-VA, the MR, Les Engagés, the CD&V and Vooruit.

It remains to be seen whether the Flemish socialists, already particularly hesitant about the idea of ​​joining this “Arizona” coalition, will not desert the negotiating table.

Culture of evaluation

If the consolidation of public finances will inevitably be one of the major challenges of the next government, the differences to achieve this are numerous and strong between these five potential potential partners.

«The challenge will be to limit unnecessary spending and to no longer spend poorly used money, which has no impact on growth.», continues Bertrand Candelon in this regard.

For this, the professor pleads for “a change of culture“. According to him, it is necessary “evaluate public spending so that it has a productive effect». Or, observe-t-il, «Belgium lacks this philosophy of evaluation».

Awareness

But will savings, however strong, be enough to achieve the goal?

«If we look at our deficit, it is lower than that of France or Italy. Our problem is its trajectory and the aging of the population. We must reform pensions, the labor market and rationalize spending. We can return to a threshold without increasing taxes, but there needs to be awareness at all levels. Because we are up against the wall», replies Professor Candelon in conclusion.

An adjustment trajectory by September 20

Belgium now has a period of three months (until September 20) to present a “medium-term budgetary and structural plan“, that is to say a budgetary plan on a national scale which includes, on the one hand, the objectives in terms of public spending (in the medium term, therefore) and, on the other hand, the way in which investments and reforms will be undertaken. In this regard (and from this Friday) the European Commission will provide a series of guidelines to guide the exercise.

Secondly, and after evaluating this plan, the Commission will then have six weeks to formulate recommendations intended to bring Belgian public spending back to a viable trajectory, within 4 years (or 7 years, if a certain number of criteria are met). are respected).

While negotiations are underway at all levels of power with a view to defining the policies (spending, investments, reforms, etc.) which will be carried out in each entity over the next 5 years and to forming the governments which will be responsible for applying them , additional time could however be requested by Belgium in order to submit its plan. In the event of refusal, it would be up to the current government, in current affairs, to have the task of submitting this plan, a plan which should then be presented with unchanged policy.