COUNCIL OPINION

of 15 March 1999

on the stability programme of Belgium, 1999 to 2002

(1999/C 124/04)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies(1), and in particular Article 5(1) and (2) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 15 March 1999, the Council examined the stability programme of Belgium, which covers the period 1999 to 2002. The Council notes that the programme aims at further reducing the general government deficit and debt as percent of GDP, by maintaining the pace of the fiscal consolidation effort pursued under the second convergence programme. Moreover, the Council considers that the programme is consistent with the Broad Economic Policy Guidelines.

The Council notes that the budgetary projections of the programme are based on a prudent macroeconomic scenario forecasting real GDP growth of 2,4 % for 1999 and 2,3 % per year, for the period 2000 to 2002. Under this scenario, the general government deficit is projected to fall to 0,3 % of GDP in 2002 and the debt ratio is expected to decline by about 11 percentage points between 1998 and 2002. The considerable improvement in the macroeconomic performance realised in Belgium in recent years, characterised by low inflation, declining interest rates, wage moderation and good export performance, suggests that the projected growth rates should be attainable.

The Council commends the emphasis given in the programme on maintaining annual primary surpluses at 6 % of GDP as a central element of the strategy for budgetary consolidation and debt reduction; the achievement of high primary surpluses has been the anchor of budgetary policy in Belgium in recent years and their contribution to further fiscal consolidation, in particular the steady decline in government debt, will remain decisive in the medium-term. The Council notes that the stability programme considers that no additional discretionary measures will be necessary to achieve this target, assuming that the measures of permanent nature already adopted will continue to provide a sufficient yield; this policy option seems credible to the Council.

The Council considers that the underlying budgetary position corresponding to a deficit of 0,3 % of GDP for the year 2002 is sufficient to provide a safety margin to prevent the deficit from breaching the 3 % of GDP threshold as a result of normal cyclical fluctuations. Therefore, the budgetary medium-term target of the Belgian stability programme is in conformity with the requirements of the Stability and Growth Pact. However, fiscal consolidation in Belgium needs to be pursued beyond the horizon of the programme in order to ensure the continuation of the decline in the debt ratio and to respond to longer term issues in particular those stemming from the ageing of population.

The Council commends the affirmed determination of the Belgian Government to adopt corrective measures in case any deviation from the norm set for the primary surplus should occur; it also notes that the stability programme defines a realistic rule for accelerating the deficit reduction in case of higher than expected growth. It urges the Belgian authorities to monitor the situation of public finance and take all necessary measures in order to ensure the achievement, at federal and regional levels, of the objectives set in this area.

The Council notes with satisfaction that the planned fiscal consolidation effort will be accompanied by measures aimed at reducing the overall tax burden and labour costs, through the indexation of income tax brackets and the reduction in social security contributions paid by employers. However, the Council considers that efforts should be pursued in order to further alleviate the tax burden in Belgium.

It also notes that the stability programme provides for a margin for an annual increase in real primary expenditure of 1,5 %. The Council acknowledges that the allocation of increased resources to the current low level of government investment would enhance the potential of Belgian economy. It encourages the Belgian authorities to proceed further in introducing and implementing the necessary structural reforms in order to improve the functioning of labour and product markets and the quality of public expenditure.

The Council notes that the successful implementation of the stability programme hinges on the close coordination of actions at all levels of government; it encourages the authorities in Belgium to continue their close cooperation to this end.

(1) OJ L 209, 2.8.1997, p. 1.