21st May 2022

Belgium unveils budget deal under EU, market pressure

  • Belgium has finally has a budget (Photo: IAEA)

Belgium may finally have a government after 530 days without one. While coalition talks have dragged on for months, a shock cut to the country's credit rating suddenly spurred agreement on a budget for 2012 in less than 24 hours, with government negotiators adding that the stalemate over building a workable coalition could be over as early as next week.

"There are several areas we need to work on and we think we can do it in a short time. I hope that we can have a new full government by next weekend," would-be prime minister Elio Di Rupo told reporters on Saturday (26 November).

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The six parties involved - including francophone and Dutch-speaking Socialists, liberals and Christian Democrats - cobbled together plans to cut €11 billion from spending next year and liberalise labour regulations.

Pensions spending is to be reduced, notably by restricting early retirement schemes, although the retirement age would remain at 65. Cuts are also planned for the military and public services, notably the railways and the postal service. "All government agencies will have to give a little," Di Rupo said.

The budget deal comes after an earlier agreement in October on devolution of federal powers to language regions in the south and north.

"My first words go out to our citizens, whom I want to thank for their patience," Di Rupo said.

He said that financial markets helped spur the spending agreement - Standard & Poor's on Friday (25 November) downgraded the country’s credit rating to AA from AA+, citing "protracted political uncertainty."

Di Rupo added that EU authorities also piled on pressure: "We also had to respond to the European Union, which asked us to contribute to the rescue of the euro and which has not hesitated to threaten our country with sanctions."

The European Commission had threatened the country with a €700 million fine if it did not commit to spending reductions by mid-December.

Economic and monetary affairs commission Olli Rehn, was quick to welcome the new budget.

"Mr Di Rupo's announcement that the budget law should be worked out very soon is equally important, as it should provide for a swift and full assessment by the European Commission," he said in a statement.

But trade unions have called the budget "unbalanced" and "unfair", vowing to take to the streets at the end of this week.

"The inequality and poverty in this country will grow," said Rudy De Leeuw, of the General Federation of Belgian Labour, the Socialist-Party-linked trade union.

"We can't accept the spending cuts on the back of employees and that is why we will protest on 2 December to tell the negotiators that adjustments will have to be made," said Jan Vercamst, leader of the General Confederation of Liberal Trade Unions of Belgium.

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