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A new assessment of the action taken by Belgium to correct the excessive deficit by 2012 in response to the Council Recommendation of 2 December 2009, leads to the following conclusions: — Following the EDP notification of the 2012 general government deficit and its validation by the Commission (Eurostat), the 2012 deficit came out at 3,9 % of GDP. This was partly due to the urgent need to recapitalise the banking group Dexia at the end of 2012, which had a negative impact of 0,8 % of GDP on the government deficit. However, even without this operation the deadline would have been missed, with a deficit of 3,2 % of GDP excluding the one-off negative impact of that operation. Moreover, the 2012 budget contained substantial deficit reducing one-off measures, estimated at around 0,4 % of GDP. — The primary balance improved from a deficit of 1,9 % of GDP in 2009 to 0,4 % of GDP in 2010, while remaining broadly stable in 2011. In 2012, the primary deficit deteriorated to 0,5 % because of the impact of the Dexia recapitalisation, without which the primary balance would have shown a surplus of 0,3 % of GDP. — The average annual fiscal effort since 2010 is estimated at 0,3 % of GDP, significantly below the ¾ % of GDP recommended by the Council. Also after correction for the effects of revised potential output growth and revenue developments, the adjusted average fiscal effort is less than half of the recommended effort. A bottom-up calculation estimates the cumulative net impact of discretionary measures of a permanent nature at around 2 % of GDP over 2010-2012. This calculation includes both deficit-reducing measures as well as expenditure increases to some extent due to policy decisions of the past (such as, welfare adaptations of social benefits, rapidly rising wage subsidies to companies) which partly offset the consolidation efforts. Moreover, the impact of these 2 %-of-GDP discretionary measures has been insufficient to offset the autonomously rising trend in public expenditure due to population ageing and, at the same time, achieve the recommended improvement of the structural balance over the consolidation period. — In 2010, Belgium broadly implemented the deficit-reducing measures as planned, which led to a structural improvement of ½ % of GDP, of which ¼ percentage points were due to a strong decline in interest expenditure. The nominal deficit fell from 5,6 % of GDP in 2009 (which included 0,6 percentage points of negative one-off factors) to 3,8 % of GDP, substantially lower than the objective of 4,8 % of GDP planned by the Belgian authorities in the January 2010 Stability Programme, due to the better-than-expected macro-economic outturn. In 2010 GDP grew by 2,4 %, compared to a growth rate of 0,6 % expected at the time of the Council Recommendation of 2 December 2009. — Despite relatively favourable macro-economic conditions in the first half of 2011 (annual GDP growth of 1,8 %), the nominal balance fell only marginally that year, to 3,7 % of GDP, compared to a target of 3,6 % of GDP in the 2011 Stability Programme. The structural balance deteriorated by 0,1 % in 2011. Therefore, Belgium failed to take advantage of the relatively favourable economic times to reduce its deficit, partly due to the political deadlock at federal level between the June 2010 elections and December 2011. — In December 2011, the newly constituted Belgian government included in the 2012 budget a series of consolidation measures amounting, according to the budget and the Stability Programme for 2011 to 2015, to about 3 % of GDP. Additional measures were taken in March 2012 and October 2012 in order to offset the negative impact of the economic slowdown on the budget. At the end of 2012, the Belgian and French governments needed to increase the capital of the banking group Dexia, in order to remedy a negative net asset position and allow the orderly resolution of the group to go ahead. For Belgium, this had a one-off negative impact on the deficit of 0,8 % of GDP. Moreover, despite a mechanism of reinforced monitoring, the economic downturn impacted government revenue more than expected, resulting in a deficit at federal level of 2,7 % of GDP excluding the impact of the Dexia operation compared to a target of 2,4 %. In addition, in the April 2013 EDP notification, it turned out that the local government level had missed its deficit target (-0,3 % of GDP instead of -0,2 %), which was only partly offset by a better-than-expected result by regions and communities (-0,1 % of GDP instead of -0,2 %). The structural budget balance is estimated to have improved by ½ percentage point of GDP in 2012. Sizeable government measures have been partly offset by rising interest expenditure, a negative impact of the automatic indexation of wages and social benefits linked to past inflation, and a strong increase in pension expenditure. — Public debt rose from 84,0 % of GDP in 2007 to 99,6 % of GDP in 2012. The dynamics of the deficit and of GDP account for around 6,5 percentage points of the increase, while exogenous factors amount to around 9 percentage points, mainly due to rescue operations in the financial sector in the form of equity injections.