European Commission condemns Belgian public spending

European Commission condemns Belgian public spending

The European Commission is slapping Belgium on the wrist for its public spending, which is now the fastest growing in Europe with broad and poorly targeted support measures, L’Écho reports.

Next Tuesday, the European Commission will vote on the 2023 draft budgets of EU Member States. According to unnamed sources with the Commission, Belgium’s budget has not been well received.

The Commission now forecasts that Belgium’s budget deficit will rise to 5.8% of GDP, the highest budgetary total in the EU. This figure doesn't even fully encapsulate the real state of Belgian public finances.

Well-intentioned or irresponsible?

On Tuesday, Secretary of State for the Budget, Eva De Bleeker, was reprimanded by Prime Minister Alexander De Croo for seeking to implement measures that would raise the deficit even higher to 6.1%.

While Belgium has the worst fiscal management in the eyes of the Commission, it is far from being alone in going in the wrong direction. The war in Ukraine, and subsequent inflationary and energy woes, have forced governments to dig deep to help citizens and cushion the economy from external shocks.

In an interview with L’Écho, Valdis Dombrovksis, Vice-President of the European Commission, acknowledged that budget forecasts were “not going in the right direction.”

Spendthrift Belgium

If EU Member States want to help vulnerable households and companies, the consensus is that this should be done with “targeted and temporary measures.” Unfortunately, in the eyes of the Commission, this is rarely the case with support too broad and costly, Domobrovskis stated.

The commissioner noted that measures taken by the Belgian government to introduce VAT reduction and energy vouchers are too broad and go beyond European standards of targeted measures.

The Commission urges Member States to adopt a two-tiered pricing system to alleviate energy pressure on households. This would include a subsidy covering basic needs and above that, normal prices at market rates. The Commission has already asked EU countries with medium to high levels of debt to pursue a prudent fiscal policy. Belgium is one of them.

Belgium goes its own way

Yet despite these clear recommendations, Belgium has continued to widen its budget deficit, accruing debt. Instead of this unsustainable spending, Belgium would have been better served by tapping into the European Recovery Fund (RFF). In order to use these funds, Belgium would have had to commit to specific reforms.

This year, the RFF refused Belgium over €1 billion because the Commission considers De Croo’s pension reform to be too costly, weighing down on Belgium’s, and by extension Europe’s, credit rating.

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The current energy crisis means that European budget rules remain temporarily suspended until the end of next year. The Commission’s final verdict on the Belgian budget will be based on recommendations and guidelines issued last spring. Given Belgium’s expenditure, this verdict will almost certainly be negative.

“If we want to coordinate economic policy in Europe effectively, Member States must adapt their measures,” warned Dombrovskis.

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