New European budget rules are not a gift for Belgium

A large majority of the European Parliament gave final approval to the new European budget rules on Tuesday. With a high budget deficit and rising debt, the application of these rules becomes a path full of thorns for Belgium.

The three main political groups in the European Parliament, the centre-right European People’s Party, the social democratic S&D and the liberal Renew, finally agreed on Tuesday to tighter European budget rules. The new rules offer a tailor-made process, which the European Commission agrees with each Member State separately. The application of the rules will also be monitored more strictly.

That adjustment was necessary. In recent crisis years, debts and budget deficits rose far beyond the figures set in the EU treaties of a maximum of 60 percent and 3 percent of gross domestic product (GDP). The old budget rules were inefficient and put too little pressure on the Member States. The anticipated fines and sanctions were never enforced.

From now on, countries with a government debt of more than 90 percent, such as Belgium, will have to reduce the debt by 1 percent of GDP every year. The budget deficit must not only fall below the 3 percent limit, but must subsequently be further reduced to 1.5 percent. This approach should prevent problem countries from ending up in the danger zone again at the slightest disturbance.

Minister of Finance Vincent Van Peteghem (CD&V) welcomes the new rules. The efforts in the new framework are on average lower than those in the old framework and even lower than the figures that Belgium included in the stability program, he says. Yet the new rules put quite a lot of pressure on Belgium. The budget deficit rose to 4.4 percent of GDP in 2023, the fifth highest in the eurozone. Government debt rose to 105.2 percent of GDP in 2023.

To reduce the deficit, Member States can opt for a four- or seven-year path. A four-year formula is too difficult for Belgium. In addition to savings, a seven-year process also allows for the necessary investments.

But putting the debt and deficit on a downward trajectory requires major efforts. And a caretaker government from June 9 has little margin. On June 19, the European Commission decides to punish Belgium for its excessive budget deficit in 2023.

By September 20, our country must submit a first multi-year budgetary plan that takes into account the recommendations for our country. There is some stretch on that date, but there is a real chance that there will still be no government by then.

Hilde Vautmans (Open VLD) realizes that these EU budget rules are stricter. ‘Belgium will feel this. Budgetary efforts must be made in the coming years.’ Johan Van Overtveldt (N-VA) voted in favor of the budget rules. ‘A monetary union cannot survive without budgetary discipline.’ He fears that the European Commission will not have the courage to use the big stick if it is really necessary.

The Greens voted against, as did some Social Democrats such as Kathleen Van Brempt (Vooruit). ‘Our country would have to clear around 27 billion euros in the next four to seven years. That is almost impossible without cutting health care or affecting social security.’ Philippe Lamberts (Ecolo) calls the rules an ‘economic, ecological, geopolitical and ultimately even a democratic suicide. Not since the euro crisis have I witnessed such political sleepwalking towards disaster.’