Belgium in Brief: Winning the economy argument, the Belgian way

Belgium in Brief: Winning the economy argument, the Belgian way
Credit: Belga

On the issue of national finance, Belgium is used to being scolded for an unsustainable deficit that is balanced on the brink of disaster. It's a refrain that has been heard from EU auditors and international monitors alike, though the persistent warnings have done little to set the country on a more "responsible" course, with Belgium's budget deficit on course for 5% of annual GDP next year.

This puts us well beyond the limits defined by the EU's Maastricht Treaty, which requires Member States to stay within 3%. Whilst allowances were made for the exceptional international challenges faced in the last three years, Belgium has well overshot the realms of what is deemed acceptable.

But how to show the fiscally prudent that the country is taking steps to rein in its overspending? One of the most frequently cited targets is the automatic wage indexation, by which public sector wages rise in line with inflation as a means of protecting purchasing power. The mechanism – which only Belgium, Luxembourg and Cyprus have – is without fail presented as a blight to the country's competitiveness as investors look elsewhere for cheaper labour costs.

This argument has previously been challenged however, with defenders of the wage indexation pointing to other factors that also harm the national prosperity. And with latest employment rates and economic growth painting Belgium in a more favourable light than it often is, the State Secretary for Economic Recovery and Strategic Investments was eager to seize on the opportunity to sing the country's praises.

In conversation with my colleague Maïthé, Thomas Dermine (PS) was effusive about Belgium's prospects: "If you look at the data of the country's economy and job markets, it is quite amazing how well Belgium is performing." In defence of the automatic wage indexation, he insisted that "increasing wages is a way to fuel economic growth" and downplayed the differences between regions (growth in Flanders is markedly higher than in Wallonia).

However, the conviction that "we have a good record to defend" won't persuade detractors, who question the long-term economic outlook and note that a temporary success in some areas is far from definitive proof that "the Belgian way," as Dermine called it, is the way to go.

It's normal for ministers to bang the drum for signs of promise they have presided over, now in particular as parties kick into campaign gear. But the argument is far from settled and with elections just months away, the critics will keep getting louder.

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