EUROPEAN COMMISSION Brussels, 23.6.2021 SWD(2021) 172 final COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Belgium Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Belgium {COM(2021) 349 final}



Table of contents 1. Executive summary 2. Recovery and resilience challenges: scene-setter 2.1. Macroeconomic outlook and developments since the 2020 country report 2.2. Challenges related to sustainable growth, cohesion, resilience and policies for the next generation 2.3. Challenges related to the green and digital transition Green dimension Digital dimension 3. Objectives, structure and governance of the plan 3.1. Overall strategy of the plan 3.2. Implementation aspects of the plan 4. Summary of the assessment of the plan 4.1. Comprehensive and adequately balanced response to the economic and social situation 4.2. Link with country-specific recommendations and the European Semester 4.3. Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence 4.4. The principle of ‘do no significant harm’ 4.5. Green transition 4.6. Digital transition

4.7. Lasting impact of the plan 4.8. Milestones, targets, monitoring and implementation 4.9. Costing 4.10. Controls and audit 4.11. Coherence Annex: Climate and digital tagging References 1.Executive summary The COVID crisis had a major impact on the Belgian economy and public finances. After GDP fell by 6.3% in 2020, economic growth is forecast to reach 4.5% in 2021 and 3.7% in 2022. The impact of the COVID-19 crisis on the Belgian labour market has been largely mitigated by significant support policy measures. The expansion of total employment in recent years was interrupted in 2020 and a 0.6% fall is expected in 2021. The unemployment rate is expected to rise from a historical low of 5.4% in 2019 to 6.7% in 2021. As a consequence of the fall in economic activity and of the measures taken by the government to tackle the impact of the crisis, the public deficit has deteriorated markedly from 1.9% of GDP in 2019 to 9.4% in 2020 and the public debt has increased from 98.1% of GDP in 2019 to 114.1% in 2020. To support the country’s economic recovery, Belgium has requested EUR 5.9 billion of non-repayable financial support under the Recovery and Resilience Facility. This financing offers the opportunity to strengthen economic, social and territorial cohesion, in particular accelerate the green and digital transition mostly through public investment and associated enabling reforms, and to address core challenges. As a result of high public debt and policy choices over the past decades to save less on current expenditure and more on public investments, the public capital stock has seen a negative growth, eroding the quality of public infrastructure and dampening long-term economic potential. Belgium has important investment needs, notably in social housing, education, sustainable transport and energy. Moreover, Belgium lags behind in digital infrastructure with digital public services underused, hampering productivity and innovation. Structural reforms in the areas of pensions, taxation, public spending, the labour market and the business environment are needed to support more sustainable and inclusive growth. The proposed Recovery and Resilience Plan of Belgium is expected to contribute to effectively addressing a significant subset of the challenges identified in the relevant country-specific recommendations and in the draft Council recommendation on the economic policy of the euro area. To improve the quality and efficiency of public spending, the plan includes the systematic integration of spending reviews in the budgetary planning cycles of all government levels. Against the background of increasing public pension expenditure, the plan includes a pension reform, which aims to improve the financial and social sustainability of the pension system. The Belgian recovery and resilience plan also includes several measures to address labour market challenges and strengthen the social and labour market integration of vulnerable groups, such as people with a migrant background, women, youth, people with disabilities, prisoners and people at risk of digital exclusion. The plan refers to a proposal for a broad tax reform, which could potentially tackle the financial disincentives to work embedded in the current tax system, green the taxation system and discourage the use of fossil fuels through appropriate price signals, but given the absence of clear timeline and commitment to adopt the reform, it could not be included as a measure supported by the Facility. The plan contains a reform of the company car tax scheme, geared towards the electrification of road transport. The reform is expected to contribute to reduce greenhouse gas emissions, but does not limit congestion nor the budgetary impact of the scheme. The plan provides a comprehensive and adequately balanced response to the six policy pillars referred to in Article 3 of Regulation (EU) 2021/241. Ten of the 17 components in the Belgian plan are directly related to the green transition and 11 components address the digital transformation (pillars 1 and 2). The remaining four policy pillars are addressed adequately through additional measures to: (i) strengthen training and employment of vulnerable groups; (ii) introduce spending reviews at all government levels; (iii) reinforce economic activity through R&D support; (iv) provide social housing and childcare infrastructure; (v) implement measures to digitalise public services; (vi) strengthen the education and training systems; and, (vii) reform the pension system. The plan is expected to effectively contribute to strengthening the growth potential, job creation, and economic, social and institutional resilience of Belgium and to mitigating the economic and social impact of the COVID-19 crisis, although the direct impact on job creation could have been enhanced with more ambitious reforms. The plan is expected to have a positive economic impact by supporting public and private investment, notably in sustainable transport and digital infrastructure, social housing, energy-efficient building renovation, alternative energy infrastructure and research and innovation. By contributing to a greener and digital economy, the plan intends to support sustainable growth and economic resilience. The sizeable investment in digitalisation of the public administration and of the justice system is expected to contribute to a business-friendly environment and thereby support the economic recovery. Moreover, the plan is expected to help address skills mismatches by strengthening the education and training systems. The focus on improving digital skills and fostering access to the labour market for vulnerable groups is expected to have a positive impact on employment and contribute to the implementation of the European Pillar of Social Rights and the Porto declaration adopted on 7 May 2020. The Belgian plan strongly supports the energy-efficient renovation of buildings and supports the decarbonisation of the energy, industry and transport sectors, which are areas with major needs for reaching the 2030 energy and climate targets. The building sector accounts for more than 30% of non-ETS GHG emissions in Belgium, and ranks low in relation to the energy performance of its existing housing stock. The plan includes substantial investments to improve the energy efficiency of public buildings, as well as private and social housing. Moreover, it is expected to improve the system of renovation subsidies for households to foster private investment. The plan also intends to support several clean emerging energy technologies geared towards decarbonisation, notably in the areas of hydrogen production and transport. Overall, even if it includes only limited investments into renewable energy, the plan is expected to contribute to decarbonising the energy sector. Finally, several measures aim to restore biodiversity, protect the environment, adapt to climate change and develop a more circular economy. The plan also aims to contribute to the transformation of the transport sector, which generates 35% of non-ETS greenhouse gas emissions in Belgium. Moreover, Belgium lags behind in electric mobility and road congestion weighs on productivity and local air pollution. The plan includes substantial support to favour active modes of transport and promotes the use of public transport, with a particular focus on rail. It also supports investments in inland waterways transport. Several measures of the plan are expected to also support the electrification of public and private transport, including by accelerating the deployment of electric charging infrastructure. The plan also aims to improve Belgium’s resilience to climate change by investing in more rational use of water resources and in the protection of biodiversity. The measures contained in the Belgian recovery and resilience plan contributing to the climate objectives account for an amount which represents 49.6% of the plan’s total allocation. All measures in the Belgian plan have passed the ex-ante assessment of the ‘do no significant harm’ principle. Moreover, various investments and reforms support the digital transition, through the digitalisation and equipment of public services and the roll-out of digital infrastructure. The reinforcement of the digitalisation of the economy was identified as a promising avenue for boosting productivity and the innovation capacity of Belgium. Reforms both at the federal and regional level aim to remove regulatory bottlenecks to the deployment of 5G and ultra-fast connectivity infrastructure, such as fibre. Investments focus on the digitalisation of the public administration and include the roll-out of digital infrastructure. Finally, investments aim at strengthening the overall cyber resilience and cyber crisis preparedness of the Belgian society. The measures contained in the Belgian recovery and resilience plan contributing to the digital transition account for an amount which represents 26.6% of the plan’s total allocation. The Belgian plan is expected to have a lasting impact to a large extent, which could be enhanced with more far-reaching complementary reforms. The reforms proposed in the recovery and resilience plan are expected to contribute to addressing key economic challenges and impact on institutions and policies in a lasting manner. However, as some of the reforms are described in rather general terms in the plan, it is difficult to anticipate their full effects in the long run. The reform of the pension system is a case in point. Moreover, while the plan refers to a proposal for a broad tax reform, which could remove disincentives to work on a permanent basis and shift taxes towards energy products in order to provide appropriate price signals, the plan does not include a firm commitment to its adoption. At the same time, Belgium is also expected to benefit from important spillovers of other Member States’ recovery plans. Finally, the plan displays a mostly coherent set of reforms and investments. However, it could have better exploited the potential of some of the investments through more far-reaching complementary reforms and in some instances, measures could have been more coherent and mutually-reinforcing. Belgium has proposed organisational arrangements to ensure that the plan’s implementation can effectively be monitored and has demonstrated that the estimated costs of the plan are reasonable and plausible. While complex, the governance structure and organisational arrangements for the implementation of the plan ensure the involvement of the responsible actors in monitoring, reporting and administrative follow-up of the reforms and investments under their responsibility. Inter-federal coordination between the entities involved is ensured at both political and administrative level. The monitoring indicators are in general sufficiently clear and comprehensive to ensure that their completion can be traced and verified. The milestones and targets chosen cover the key elements of the measures and as such can be considered relevant for their implementation. The costing information presented in the plan is, for the most part, detailed and clear. For a large majority of measures, there is sufficiently detailed information and comprehensive supporting evidence that the estimated total cost of the plan is reasonable and plausible, in line with the principle of cost-efficiency and commensurate. The individual components do not all, as a rule, provide detailed information about additional investments from other EU funds. Therefore, an adequate milestone to ensure coordination between all entities to avoid double funding has been included in the plan.

Table 1 - Ratings received by the Belgian recovery and resilience plan under the eleven criteria (1)

Balanced Response (2)

CSRs (3)

Growth, jobs… (4)

DNSH (5)

Green target (6)

Digital target (7)

Lasting impact (8)

M & T (9)

Costing (10)

Control Systems (11)

Coherence A A A A A A A A B A B 2.Recovery and resilience challenges: scene-setter 2.1.Macroeconomic outlook and developments since the 2020 country report The macroeconomic scenario underpinning Belgium’s Stability Programme and Recovery and Resilience Plan (RRP) projects real GDP growth of 4.1% in 2021 and 3.5% in 2022 after a historic drop of 6.3% in 2020 caused by the COVID-19 crisis. Belgium’s open economy particularly suffered from the restrictions to free movement of goods and people which led to severe supply chain restrictions as exports account for more than 80% of Belgium’s GDP. The macroeconomic projections of the recovery and resilience plan are based on the last Federal Planning Bureau’s forecast which was produced in February 2021. Growth is set to be supported by the recovery of domestic demand (public consumption and household investment and consumption). The contribution of net exports to GDP growth is expected to be slightly negative throughout the forecast horizon, as imports would recover more strongly than exports. Afterwards, real GDP growth would decelerate at 3.5% in 2022 and would converge towards 1.5% in 2024. Private consumption would grow by 6.1% in 2021 after the drop of 7.7% in 2020. The purchasing power of households has been maintained by government support during the crisis, which led to an increase in the saving rate to 20.3% in 2020. The saving rate would drop to 16.3% in 2021. Regarding enterprises investment, the Federal Planning Bureau projects the recovery to really start in 2022 after a slow growth of 1% in 2021. The macroeconomic forecast of the Belgian recovery and resilience plan is broadly in line with the 2021 Spring forecast of the Commission. According to the Spring forecast, GDP growth is expected to reach 4.5% in 2021 and 3.7% in 2022. The main differences with the forecast of the Federal Planning Bureau included in the recovery and resilience plan are coming from the inclusion of the impact of the recovery and resilience plan and from new data available since the Federal Planning Bureau’s forecast, notably the revision of figures for 2020. Investment was severely hit by the COVID-19 crisis in 2020. However, the strong rebound in the second half of the year limited the drop in annual terms to -6.9%. According to the Commission Spring forecast, improving business confidence, favourable financing conditions, and the entry into force of the Recovery and Resilience Facility (RRF) are set to continue to support investment, despite possible solvency and liquidity concerns. Furthermore, an increase in public consumption is forecast to contribute to GDP growth in 2021. Exports are set to recover thanks to the strength of the external environment. Following the recovery in domestic demand and exports, imports are also forecast to rebound strongly. Real GDP is projected to reach its pre-crisis level in the first half of 2022. Regarding the labour market, job and business support measures have allowed employment to remain broadly steady and have kept bankruptcies at low levels. The gradual expiry of some of these measures is expected to contribute to an increase in bankruptcies. The Federal Planning Bureau projects a rise in unemployment from 5.6% in 2020 to 6.8% in 2021 and 2022, before gradually improving to 5.3% in 2026, consistent with economic growth. According to the Commission Spring forecast, unemployment would reach 6.7% in 2021 and 6.5% in 2022. The fall in economic activity and energy prices has depressed annual HICP inflation from 1.2% in 2019 to 0.4% in 2020. In line with the rebound expected in both oil prices and economic activity, annual HICP inflation is forecast to rise to 1.8% in 2021 according to the Commission forecast. It is then projected to slow down to 1.5% in 2022, as energy prices stabilise. The Belgian Federal Planning Bureau expects HICP to reach 1.5% in 2021 and 2022, before 1.7% in 2023 and 2024. Overall, the macroeconomic scenario presented in the Belgian plan and underpinning the budgetary projections for 2021 and 2022 in the 2021 stability programme is realistic, based on plausible macroeconomic assumptions compared to the Commission 2021 Spring forecast. The COVID-19 crisis contributed to a deterioration of the financial situation of Belgian companies. A large number of non-financial firms experienced a depletion of their liquidity buffers as a result of a sudden stop in their activities, not counterbalanced by an equivalent stop in financial commitments. In response to the COVID-19 pandemic, measures have been adopted to preserve the economic fabric of the country, in particular by adopting measures to support the liquidity of firms and limit the number of bankruptcies. These extensive support measures adopted by the public authorities have contributed to mitigate the negative effects. A recent analysis estimated that the support policy measures alleviated liquidity concerns and reduced the share of firms with an outright cash deficit from 20% to 15% (National Bank of Belgium, 2021a). Nevertheless, it is very likely that a large share of firms will start the recovery period with deleveraging pressures, which can have negative consequences on their ability to carry out investment plans. Households have been less financially affected than companies by the COVID-19 pandemic. Over the first 11 months of 2020, households’ savings as measured by bank deposits increased by EUR 18.1 billion (against an average increase of EUR 12.1 billion between 2011 and 2019). Over the same period, housing prices have continued to increase alongside the average amount of real estate loans. The increases in housing prices occurred in spite of a tightening of lending conditions by banks, including stricter requirements in relation to the Loan-to-Value ratio. Overall, the financial situation of Belgian households appears sound, although there remain disparities among households. While the tax-benefit system, combined with the emergency measures adopted by the different levels of government to protect households’ income and to support economic activities, has played a significant role in cushioning the effect of the economic downturn, some vulnerable groups of the population, with an already weak financial position, risk to become more exposed as a consequence of the crisis. The COVID crisis has also had a strong impact on Belgium’s public finances. According to the RRP’s forecast, the public deficit has deteriorated from 1.9% of GDP in 2019 to 9.7% in 2020, as a consequence of the fall in economic activity and of the measures taken by the government to tackle the impact of the crisis. It is forecast to improve to a still large deficit of 7.0% in 2021. The public debt is expected to increase from 98.1% of GDP in 2019 to 114.8% in 2020 and to 115.9% in 2021. The Commission forecast has similar numbers, with a deficit of 7.6% in 2021 and a public debt of 115.3%. Belgium is currently assessed as facing high fiscal sustainability risks in the short, medium and long term. Short-term risks stem from the sharp deterioration of public finances in 2020 and the resulting surge in financing needs to 26% of GDP (European Commission, 2021). The latter should however decline, to around 21% of GDP in 2021-2022. Moreover, the ‘AA’ sovereign rating from the three major credit rating agencies as well as the historically low sovereign spreads mitigate short-term risks. High risks in the medium term reflect the fact that, under the baseline assumptions, government debt would remain above 120% of GDP in ten years’ time, peaking at 125% in 2027. Alternative scenarios, both favourable and unfavourable, confirm these risks. In the medium term, Belgium will need a gradual fiscal consolidation to improve public finances in structural terms. Already before the outbreak of the coronavirus pandemic, Belgium had a high public debt and faced high sustainability challenges in the medium term. When economic conditions allow, it will be time to target fiscal policies towards a prudent medium term fiscal position. The government budgetary strategy for the coming years, as announced in the federal government’s coalition agreement, foresees the implementation of a fiscal rule with a fixed and variable component. This is understandable in the current environment of high economic uncertainty. However, the need for medium term fiscal sustainability, also in an environment of lower-than-expected economic growth in the coming years, remains important considering the already existing fiscal challenges. In the 2021 macro imbalances procedure, no imbalances were identified for Belgium. In the updated scoreboard including figures until 2019, out of fourteen headline indicators two, notably the private sector debt and government debt indicators, are beyond the indicative thresholds. Private sector indebtedness remained well above the threshold in 2019 and is expected to increase further in 2020 to around 200% of GDP. This is mainly due to household indebtedness, largely reflecting mortgage debt, which continued to increase in 2019 on the back of a positive net credit flow. After a fall in the first semester due to the lockdown and confinement measures, housing investment is expected to rebound in the second half of 2020. House prices increased in 2019, with indications of potential overvaluation. The already high level of government debt has increased substantially with the COVID-19 crises. At the end of 2020 it reached 114.1% of GDP, 16 percentage points higher than in the previous year. Likewise, with the COVID-19 crisis government and private sector indebtedness have increased and warrant monitoring. In its overall assessment, the Commission did not consider it necessary to carry out further in-depth analysis in the context of the 2021 macroeconomic imbalances procedure. Table 2: Comparison of macroeconomic developments and forecasts 2.2.Challenges related to sustainable growth, cohesion, resilience and policies for the next generation

For economic growth to reach its full potential, several challenges need to be addressed. The performance of the Belgian economy has been moderate over the last years and the COVID-19 crisis poses new challenges in the short term. At the same time, however, it offers the opportunity to accelerate the transition to a more sustainable and digital economy. Structural reforms and well targeted investments in green and digital infrastructure, as well as skills, are expected to contribute to more sustainable and inclusive growth. While additional investments are taking place in public transport, there remain important green investment needs in mobility, housing and energy. Moreover, Belgium lags behind in digital infrastructure and digital public services are under-used, hampering productivity and innovation. Structural reforms in the areas of taxation, the labour market and the business environment are needed to support the green and digital transition, by addressing bottlenecks, removing environmentally harmful subsidies and providing the right price signals. The COVID-19 crisis has worsened the already poor labour market outcomes of the most vulnerable groups. However, measures taken to cushion the impact of the crisis of the labour market have been rather effective and while the crisis has stunted the expansion of the Belgian labour market and the expected jump in the unemployment rate has not materialised. According to the projections of the National Bank of Belgium unemployment is expected to peak at 6.0% in 2022 (compared to the historical low of 5.4% in 2021) (National Bank of Belgium, 2021b). Nevertheless, the impact of the crisis is expected to be reflected in a higher number of jobseekers, but also in a rising number of discouraged workers who drop out or do not enter the labour market because of declining job opportunities. Persons already struggling to find employment before the pandemic, like the low-skilled, young people, people with a migrant background (in particular non-EU born women) and people with disabilities, are expected to see a further deterioration of their position on the job market. Despite the crisis, labour demand remains strong in Belgium as reflected by the high vacancy rate, which remained stable at 2.9% in the fourth quarter of 2020. Employers report having difficulties to find employees with the appropriate skills. There are considerable shortages in professional, technical and scientific occupations, due to the low number of graduates in science, technology, engineering and mathematics (STEM). Shortages are also observed in health care, construction, education and training. Moreover, participation in lifelong learning remains low at 8.2%, although up-and re-skilling is a key pre-condition for a successful digital and green transition. The COVID-19 crisis has lowered general educational outcomes, but also aggravated the already high inequalities in the educational outcomes of vulnerable learners. This includes those from low socio-economic and migrant backgrounds. It has also affected young people’s well-being, increasing the risk of dropout from education and training. Crucial reforms to increase the performance and equity of the education and training systems have also been postponed. Distance learning has highlighted the need for a qualitative high-performing digital education ecosystem, especially ensuring effective teacher training and equal access to quality digital education and its learning environment. There is a sense of urgency to roll out digital skills and competences in all school curricula. Addressing the shortage of well-qualified teachers, making their profession more attractive and investing effectively in initial teacher education and continuous professional learning are key and will contribute to addressing the above challenges and needed reforms. The lack of sufficient skilled workers, high wage costs, complex labour and tax laws and regulatory restrictions weigh on investment, productivity and growth. Large private capital accumulation and strong innovation performance in some sectors (pharmaceuticals, minerals, chemicals) have contributed to a relatively high level of productivity in Belgium. However, already before the crisis, productivity growth had slowed down in Belgium compared to its neighbouring countries (Dumont, 2021). Moreover, following a high (private) investment rate before the crisis, the outlook for business investment is a slow recovery in a context of high uncertainty. The lack of sufficient skilled workforce in some sectors, such as the building sector in view of the renovation wave, and the relative high level of labour costs constitute major barriers to investment. In addition, the complexity of tax and labour laws, as well as regulatory barriers in services weigh on investment and competitiveness and lead to low business dynamism. Weak policy coordination and evaluation contributes to a high administrative and regulatory burden weighing on competitiveness. Ineffective coordination between government levels leads to a complex regulatory environment and weighs on the delivery of a certain number of policies. Moreover, the lack of effective evaluation in the policy-making process can impact the quality of regulation and contribute to the high administrative and regulatory burden. The efficiency of the public administration could be reinforced, including by increasing the staff for enforcers in justice, regulation, market surveillance and competition. The good innovation performance of Belgium rests on a few sectors and on a limited number of firms, which can be a source of vulnerability. Belgium ranks 6th in the 2020 EU innovation scoreboard and qualifies as a “strong innovator”. Private R&D investment is relatively high, and though mostly concentrated in a limited number of multinational companies, it is also made to a significant extent by SMEs, which invested 0.7% of GDP in R&D activities. Public R&D intensity, however, remains below comparable Member States. The efficiency of the high level of public support for business R&D is not proven. The gap between the best and the least performing firms is widening, which might signal an insufficient diffusion of technological advances (National Bank of Belgium, 2017). Recent analysis also underlines that innovative firms are less affected by the crisis (Marques Santos et al., 2021). The COVID-19 crisis had a negative impact on corporate lending but the phase-out of liquidity support measures, notably the credit moratorium, has not led to a surge in defaults in the absence of flanking measures. Corporate lending grew by 2.8% from February to September 2020, while the euro area benefited from a 6.4 percentage points surge. This may be partly due to the Belgian loan guarantee scheme providing support to businesses in the form of State guarantees on new short-term loans that was implemented relatively late and that was not particularly attractive compared to similar schemes in other Member States. The moratorium on loan repayments agreed between the Belgian authorities and the banking sector has been met with a significant demand. Loans under non-expired and expired moratoria represented respectively 0.9% and 4.0% of all loans to the private sector in December 2020. There is a trade-off between extending support measures for too long, with the risk of zombie firms, delaying the timely recognition of losses in the banking sector and wasting public resources, and ending them too soon, which could generate an excessive number of defaults. The strengthening of equity in viable companies is therefore crucial to avoid a wave of bankruptcies. Another important action is to improve the efficiency of the insolvency framework. 2.3.Challenges related to the green and digital transition Green dimension Further efforts are needed to ensure Belgium is on the path to achieve the objective of climate neutrality by 2050. Greenhouse gas emissions in Belgium in 2019 were 13% below 2005 levels compared to a 2020 target of -15%. The Belgian National Energy and Climate Plan (NECP) includes additional measures that if implemented should nearly bridge the gap to reach the -35% 2030 reduction target. In the Land Use Land Use Change and Forestry (LULUCF) sector, Belgium intends to respect the no-debit rule by 2030 and the sector is expected to remain a net sink over the period up to 2030. However, the national long-term strategy does not set a reduction target but estimates the accumulated federated entity-specific measures in the non-ETS sectors to result in 85-87% domestic reductions by 2050 compared to 2005. Belgium is not on track to reach its renewable energy targets. The share of energy from renewable resources in Belgium’s final energy consumption reached 9.9% in 2019 and is projected to have reached 11.7% in 2020, below the target of 13% set by the Renewable Energy Directive (2009/28/EC, ‘RED’). Belgium aims to reach 17.5% in 2030, but this ambition is significantly below the 25% share calculated using the formula in Annex II to Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action (the ‘Governance Regulation’). The Belgian contributions to the energy efficiency target lack ambition and flexible energy networks are needed. Based on the NECP, Belgium’s national contribution to energy efficiency for 2030 is -15% (primary energy consumption) and -12% (final energy consumption) versus PRIMES2007 projections for 2030. These energy efficiency contributions are considered to be of low ambition (European Commission, 2020). Given the nuclear phase out and electricity sector target of 37.4% renewable electricity by 2030, the development of the different sources of flexibility and their access to markets, as well as enhanced grid connections will be necessary in the country and across borders, to integrate the rising share of renewable energy into the electricity system. In addition to the infrastructure for electrical vehicles charging, the transition of industry and heavy-duty transport will require new infrastructure to produce and distribute new energy vectors, such as hydrogen, as well as to support carbon capture use and storage. Table 3 gives an overview of Belgium’s objectives, targets and contributions under the Governance Regulation. Table 3 lists some of Belgium’s national targets in terms of greenhouse gas emissions, renewable energy, primary and final energy consumption, and level of electricity interconnectivity, comparing the latest available data with the targets for 2020 and 2030. It shows that for all indicators, except for greenhouse gas emissions and electricity interconnectivity, the 2030 ambition level is rather low for Belgium. Additional policies and measures will be needed to sustain further improvements until 2030 and to achieve the 2030 targets, in the electricity and especially in the housing (heating and cooling) and transport sectors. Table 3 - Overview of Belgium’s objectives, targets and contributions under the EU Governance Regulation National targets and contributions Latest available data 2020 2030 Assessment of 2030 ambition level Binding target for greenhouse gas emissions compared to 2005 under the Effort Sharing Regulation (%) -11% -15% -35% As in Effort Sharing Regulation National target/contribution for renewable energy: Share of energy from renewable sources in gross final consumption of energy (%) 9.9% (2019) 13% (Renewable Energy Directive target) 17.5% Low vs. 25% (contribution according to formula for 2030 in the Governance Regulation) National contribution for energy efficiency: Primary energy consumption (Mtoe) 49.1 (2019) 47.8 42.7

Low Final energy consumption (Mtoe) 35.8 (2019) 36.0 35.2

Low Level of electricity interconnectivity (%) 24 24 33 High Source: Commission Assessment of the final national energy and climate plan of Belgium, SWD (2020) 900 final. The energy-efficient renovation of buildings represents a major challenge for reaching the 2030 targets. The building sector is responsible for more than 30% of non-ETS GHG emissions in Belgium. Belgium ranked low in relation to the energy performance of its existing housing stock, which is rather old with 80% of the stock built before the introduction of energy norms. Despite supportive measures, notably in the forms of grants and tax incentives, the yearly renovation rate of the housing stock stood at only 0.4% in recent years. Renovation is also held back by bottlenecks affecting the construction sector like long building permit delays and shortages in adequately skilled construction workers. Low taxes on heating fuels (oil and gas) combined with relatively high electricity prices, do not incentivise households to invest in energy-efficient heating solutions. Belgium needs to invest in sustainable transport infrastructure and improve transport regulation. The transport sector is responsible for 35% of non-ETS GHG emissions in Belgium. Road transport congestion, fueled in part by harmful tax expenditures and the absence of consistent road pricing for passenger cars, weighs on productivity and air quality in Belgium is a cause for concern. After several years of underinvestment, government entities have designed and launched major multiannual investment plans in railways and urban transport. Belgium performs well in port and rail infrastructure, but lags behind the best performing countries in electric mobility. Belgium is also performing well in rail freight, but scores low in the quality of passenger rail services and needs to improve the supply of rural-urban public transport. There are important investment needs in rail infrastructure, in terms of rail traffic management system, suburban (RER/GEN), cross-border and port connections. Uncertainty remains over the extent to which passenger rail services will be opened to competition (a pilot project has been announced to allocate public service contracts in two transport areas by way of tenders), and the railway regulator is understaffed.

Achieving emission reduction in industry will involve substantial investments. Crucial for Belgian’s economic resilience will be the climate transformation of energy-intensive industries, such as the major petrochemical pole around Antwerp and steel around Liège and Ghent, which will require important investments in carbon capture, low-carbon hydrogen and biomass-based feedstock production and related transmission/distribution infrastructures. There is room to mitigate the negative effects of certain tax schemes, such as the company car scheme, which leads to undesirable environmental consequences in terms of road travel. The favourable tax treatment of company cars (EUR 3.75 billion or 0.9% of GDP annually) contributes to the growing road traffic volumes. Although alternatives like the cash for car system (which has been annulled by the Constitutional Court) and the mobility budget were introduced, their take-up rate is very low, since all favourable elements of the company car scheme (deductibility of fuel costs for private travel; special regime of social security contributions for benefit-in-kind; low valuation of benefit-in-kind) remain in place. Moreover, infrastructure charges are low and disregard externalities. Progress has been limited as well concerning the reduction of congestion and promotion of more sustainable modes of transport. Plans for a Belgian-wide km charge for passenger cars to follow the km-charge for lorries was put on hold due to divergences between the three regions. Nevertheless the Brussels region plans the introduction of a road pricing system in Brussels, depending on an agreement with Flanders and Wallonia. Overall, there is significant room to make tax and subsidy structures more environment friendly. Belgium annually spends EUR 2.5 billion on fossil fuel subsidies compared with EUR 1.5 billion on sustainable energy subsidies. Taxes on energy do not reflect environmental externalities and therefore discourage the use of clean energy products as compared to fossil fuels. Professional transporters and agriculture benefit from reduced excise rates on diesel. Excise duties on fossil fuels used for heating (gas oil, natural gas, etc.) are set at the EU minimum level. Retail electricity prices are significantly above the EU average, which is in large part due to distribution costs (“intercommunales”), but also to levies used to finance renewable energy support programmes and other purposes. The lower excise duties for heating affect the price signal to incentivise low-carbon energy efficiency investment decisions by households, e.g. to lower energy consumption or to switch to more energy-efficient and cleaner technologies. Reflecting to a greater extent the respective carbon or energy content and the full life cycle greenhouse gas intensity of fuels and electricity would help reduce GHG emissions, foster energy efficiency and generate tax revenue. Targeted measures alleviating energy poverty risks would also need to be integrated in the design of such a green tax shift. Dealing with air pollution remains a significant challenge especially in the Antwerp and Brussels conurbations. Belgium has a small Natura 2000 network. In Belgium, 74% and 49% of the assessments for habitats and species, respectively, indicate an “unfavourable-bad” status. Intensive agriculture, together with a high population density and, in Flanders, large land occupation rates for housing in rural areas is putting biodiversity, land use and water bodies under pressure. Flanders faces acute nitrate and phosphorus water pollution from manure and is also suffering from periodic drought concerns. Wallonia still misses adequate urban wastewater treatment for a handful of agglomerations. Digital dimension In 2015, Belgium still ranked fifth in the European Commission’s Digital Economy and Society Index (DESI), but fell to ninth place in the DESI 2020. Belgium performs only close to the EU average for most indicators. However, Belgium is an EU frontrunner for the integration of digital technologies by businesses (EU digital Scoreboard, 2021). Belgium shows a mixed performance for ultrafast connectivity, lagging behind for fibre and 5G readiness. Belgium performs well in deploying fast and very high capacity fixed networks, thanks to an upgrade of the cable network, but lags behind for fibre and 5G readiness. Fibre deployment relies mostly on private investment. The copper incumbent has accelerated its fibre rollout plan to cover 50% of households by 2025 and 70% by 2028 and a cable operator has upgraded its network to provide very high speed offers to 3 million households in Flanders and Brussels. The Brussels region intends to provide commercial access to its 400km fibre network. Nevertheless, enhanced mobile networks, especially 5G deployment, are delayed (5G readiness of 3% in Belgium vs. 39% in EU). To cushion the delay, temporary 5G licenses were awarded in July 2020. Moreover, in January 2021, the federal government tabled a draft law to organise a nation-wide and long-term 5G auction, with the objective to reach a 99.5% 5G coverage by mid-2024. This auction was not expected to take place before mid-2022. In addition, after the auction, the effective 5G deployment will require coordinated action between government levels to remove important regulatory barriers, such as stringent regional radiation limits and long lead times to obtain regional environmental permits for 5G antennae. Belgium therefore needs to increase its efforts to reach the Gigabit society 2025 and 2030 targets. Belgium faces shortages in a digitally skilled workforce and a significant part of the population does not have basic digital skills. For several years now, while above the EU average, there have been no real improvements in terms of the basic digital skills of adults (61% vs. EU average 56%) (DESI, 2020). The level of digital skills among young people is low. The Belgium ICT sector has the highest vacancy rates of the EU for workers with ICT skills, and also outside the ICT sector digital skills are becoming increasingly important. While there are small improvements in terms of the number of ICT specialists, upskilling and reskilling of workers to meet the challenges posed by digitisation remains an issue. A study from the Technology Federation Agoria shows that 4.5 million workers’ digital and related skills need to be strengthened and that without appropriate policies, by 2030, almost 540.000 jobs would remain vacant in Belgium (Agoria, 2020). The share of ICT (2.1%) as well as STEM tertiary education graduates (17.6% in 2019) is fairly low, especially for women. Moreover, although at the EU average, the share of women specialised in ICT has been decreasing. Belgium suffers from a lack of a sufficiently digitally skilled workforce, also among teachers. Overall, more coordinated action is needed from all stakeholder groups – both public and private - to address the digital skills shortage in the country. While Belgium is an EU frontrunner for using digital technology for business, more efforts are needed to fully reap the benefits of the digital transition. Belgium tops the ranking of the proportion of companies sharing electronic information internally. A significant share of companies has also integrated advanced technologies such as big data (23%) or cloud (43%), well above EU average (respectively 14% and 26%). There is still room for improvement however for Belgium to consolidate its position. Companies still lagging behind could notably be supported via Digital Innovation Hubs. SMEs are also performing well, above the EU average, with 24% of them selling online, and with 15% of SMEs selling online across borders well above the EU average of 8%. To help Belgian companies reap the benefits of the digital transition, more efforts are required to digitally re- and upskill the workforce and to improve public services’ digitisation. While Belgium is on par with other Member States in terms of digital public services offer to businesses, its offer of digital public services to citizens is below potential. Belgium has rolled out several e-government initiatives. Belgium scores well regarding online pre-filled forms and public services offered to businesses, including eID for businesses cross-border mobility (70% vs. EU: 36% in 2020). However, Belgium scores relatively low on e-government services to citizens (71% vs. EU: 75%). This offer should be enlarged, with a focus on user-centricity to sustain and further improve the uptake of these services by citizens, an area where Belgium is already performing above the EU average (66.1% vs. EU: 64.2%). A further area of improvement concerns the use of open data, where Belgium scores well below the EU average (62.4% vs. EU: 78.1%). There is also room for improvement regarding the use of eID and electronic documents by citizens. Challenges related to the digitalisation of the justice system also remain, as well as long delays for the issuance of building and environmental permits, the award of public procurements and the judicial review of environmental and building permits, which if digitised, could be further streamlined. Belgium has signed all EU declarations on development and deployment of advanced digital technologies. As already mentioned, the take-up of digital technologies, like cloud and AI, by companies is well advanced. Belgium is a member of the EuroHPC Joint Undertaking and the Brussels-Capital region participates in LUMI a pan-European high-performance supercomputer project. In 2019, major action plans and strategies at different government levels (e.g. AI4Belgium, DigitalWallonia4AI, Flemish Artificial Intelligence Action Plan) have been adopted to further boost AI development. In the field of cybersecurity, similar initiatives have been put forward, underpinned by financial support measures. Belgium benefits from a strong digital high-tech ecosystem with world-class players such as IMEC. Belgium is therefore in a strong position to reinforce its industrial capacities in advanced technologies such as next-generation cloud, microelectronics or cybersecurity. Greening of the digital sector policies remains limited. Both Wallonia and Flanders have strategies and public support oriented towards circular economy, sustainable energy production and reduction of energy consumption. In 2020, the Belgian Institute for Sustainable IT was created, though it seems mostly active in Wallonia and Brussels for the moment. The Brussels and Flemish region have also introduced mandatory sustainability criteria in its public procurement procedures. However, policies at regional or national level that specifically target the reduction of the ICT sector’s environmental footprint remain limited. Actions such as Flanders’ DUET project on urban digital twins, which aim at helping public sector decision-making to become more democratic and effective, should be multiplied. Note: EU aggregate corresponds to EU28, based on 2020 DESI report. Box 1: Progress towards the Sustainable Development Goals and the four dimensions underpinning the Annual Sustainable Growth Strategy The objectives of the Sustainable Development Goals are integrated in the European Semester since the 2020 cycle. This provides a strong commitment towards sustainability in coordination of economic and employment policies in the EU. In that respect, this section outlines Belgium’s performance with respect to SDGs with particular relevance for the four dimensions underpinning the 2021 Annual Sustainable Growth Strategy and of relevance to the recovery and resilience plans (green transition, fairness, digital transition and productivity, and macroeconomic stability), indicating possible areas where investments and reforms in line with the objectives of the Facility could further accelerate the progress on the SDGs. Green Transition In relation to waste generation and management, Belgium’s performance is relatively good with production of waste per capita (415 kg per inhabitant) in 2019 well below the EU (502 kg). The measures included in the circular economy component aim to further improve the use of resources and waste management, and therefore positively contribute to SDG 12. Belgium has well above-average nitrates and phosphate pollution problems, and there is high pressure on biodiversity. The measures in the climate and environment component address adaptation to climate change, improving resilience to droughts and heat waves but also aim at strengthening natural ecosystems and enhancing biodiversity in line with SDGs 13 and 15. The Blue Deal measure specifically addresses the problem of water scarcity targeted by SDG 6. It will support an increase in water use efficiency and actions to ensure sustainable withdrawals and supply of freshwater, benefitting different sectors of the economy, such as agriculture, industry and water transport.

Facing a big challenge to decarbonise the economy and achieve carbon neutrality in 2050, the measures included in the emerging technologies component of the plan aim at reducing the CO2 footprint of industry and heating sectors and stimulating clean hydrogen use and production. These measures should contribute positively to SDG 7. Fairness Belgium outperforms the EU average in most indicators related to poverty, inclusive growth and inequality (SDGs 1, 8, 10). Belgium is a good performer in reduced inequalities (SDG 10) thanks to its tax and benefit system. Several measures in the plan contribute to reduce skills mismatches and address discrimination in the labour market to increase the employment rate of vulnerable groups in Belgium and further accelerate the progress on SDG 1 and 8. The plan also contains several investments in social housing and sustainable mobility, with special attention to persons with disabilities, contributing to the delivery of SDG 11 in this way. Dedicated investments and reforms to make the education and training systems across communities more digital transition-proof are also included in the plan (SDG 4). While Belgium already scores above-EU average on gender equality indicators (SDG 5), several measures in the plan are likely to have a positive impact on gender equality according to the Belgian Institute for Equality of Women and Men, e.g. increased investments in childcare in Wallonia may support female labour participation, in particular as they are targeted towards municipalities with a high share of vulnerable households. Digital transition and productivity In Belgium, the percentage of young people not mastering basic skills, STEM and digital skills can be improved and the gap in educational outcomes linked to socio-economic and migration background is high (SDG 4). Moreover, the adult participation in life-long learning is below EU average (SDG 4). Several measures in the plan are expected to help address this challenge to ensure access to equitable and quality education is guaranteed through all stages of life. These include investments in upgrades of digital connectivity and equipment in schools in all three language communities to increase the effective use of technology and digital learning tools in schools. Reforms in the plan to boost life-long learning include the introduction of an individual learning account. Belgium’s 5G and fibre connectivity is lagging behind (SDG 9). The plan includes reforms that aim to remove regulatory bottlenecks to deploy the necessary very high-capacity connectivity infrastructure that are important building blocks for Belgium’s green and digital transformation. In addition, the plan includes some connectivity investments in schools and in mostly rural areas, contributing to affordable and equitable very high-capacity access for all in this way. The plan includes several measures to reduce the impact on the transport sector on the environment. The reform of the company car scheme, which excludes conventional cars from the scheme, is expected to provide a significant contribution to reach the targeted reduction in green-house gas emissions (SDG 9). The plan also includes a measure to promote effective civil society partnerships for the digital transition (SDG 17), by promoting the co-creation by citizen committees of human-centric AI technologies. Macroeconomic stability Belgium performs well on the quality of its institutions, including trust in institutions (SDG 16). However, the digital transformation of the justice system in Belgium has been lagging behind. The plan includes measures to tackle this challenge, which are expected to contribute to the efficiency of the justice system. Moreover, the plan includes measures that contribute to better public digital access to information through investments in government open data platforms. Belgium also outperforms the EU average on indicators related to sustainable economic growth (SDG 8). However, the level of public debt is high and increasing, which represents a risk in terms of fiscal sustainability. Moreover, the employment rate is low and the sizeable share of young people neither in employment nor in education and training is a concern in Belgium, in particular in urban areas. In addition, the unemployment rate, which had declined in recent years, is now increasing again due to the crisis. The introduction of spending reviews at all government levels, as foreseen by the plan, is expected to improve the quality and composition of expenditure and enhance macroeconomic stability (SDG 8). 3.Objectives, structure and governance of the plan 3.1.Overall strategy of the plan The National Plan for Recovery and Resilience of Belgium aims to accelerate the transition towards a more sustainable, low-carbon and climate-resilient economy, to maximize the benefits of the digital transformation and to ensure social cohesion and a high level of well-being for citizens. The plan also intends to improve connectivity within the country, boost labour market performance, innovation capacity of the economy and to improve the composition of public finances. Moreover the plan supports the objective of increasing public investment, contributing to close the gap created by a structural lack of public investment in the last decades. The plan is structured into six strategic axes and 17 components. The six strategic axes are (1) climate, sustainability and innovation, (2) digital transformation, (3) mobility (4) social and living together, (5) economy of the future and productivity and (6) public finances. Under the different axes, the plan presents a total of 17 components combining reform and investment measures (Table 4). Table 4 – Axes, components and associated costs of the Belgian recovery and resilience plan Axes Component Costs (EUR million) % of the total Climate, sustainability and innovation C 1.1 Renovation 1 012 17.1% C 1.2 Emerging energy technologies 608 10.3% C 1.3 Climate and environment 400 6.8% Digital transformation C 2.1 Cybersecurity 79 1.3% C 2.2 Public administration 584 9.9% C 2.3 Optic fibre, 5G and new technologies 100 1.7% Mobility C 3.1 Cycling and walking infrastructure 411 6.9% C 3.2 Modal shift 672 11.3% C 3.3 Greening road transport 209 3.5% Social and living-together C 4.1 Education 2.0 442 7.5% C 4.2 Training and employment of vulnerable groups 165 2.8% C 4.3 Social infrastructure 227 3.8% C 4.4 End of career and pensions 0 0.0% Economy of the future and productivity C 5.1 Training and labour market 371 6.3% C 5.2 Supporting economic activity 439 7.4% C 5.3 Circular economy 198 3.3% Public finances C 6.1 Spending reviews 8 0.1% 5 925 100% Under the climate, sustainability and innovation axis (Axis 1), the plan aims at accelerating the transition to a decarbonised, sustainable and climate-resilient economy. This axis reinforces the National Energy and Climate Plan of December 2019 paving the way for a long-term transition towards climate neutrality. The component 1.1 ‘Renovation of buildings’ proposes a large renovation programme focused on improving the energy efficiency of buildings. The component 1.2 ‘Emerging energy technologies’ concerns investments in research and development and demonstration of new energy technologies, as well as hydrogen, CO2 and heat network infrastructure, along the adaptation of the associated regulatory and fiscal framework. The component 1.3 ‘Climate and environment’ aims to restore biodiversity and strengthen adaptability and resilience to climate change. In particular, investments will focus on the accelerated creation of a coherent set of natural areas, forests and riverbeds acting as carbon sinks and mitigating the consequences of floods and droughts.

The digital transition axis (Axis 2) intends to accelerate the country’s digital transformation while making Belgium more resilient to the risk of cyber threats. The first component of this axis, ‘Cybersecurity’ (component 2.1) aims at significantly strengthening Belgium’s resilience to these new risks by developing protection tools and a real cybersecurity competence hub. Under component 2.2 ‘Public administration’ significant investments seek to accelerate the digitalisation of public services to improve the efficiency of services provided to citizens and businesses at all levels of government, including local authorities. Digitalisation will also be pursued for the benefit of the healthcare system and of enterprises in the media and cultural sector. Component 2.3 ‘Optic fibre, 5G and new technologies' aims to resorb delays in 5G deployment and providing universal and affordable access to connectivity in all urban and rural areas. A third objective of the plan is to improve mobility and better connect Belgian regions, while ensuring a modal shift in transport to the benefit of both the environment and all citizens (Axis 3). The first component of this axis focuses on the development of active modes of transport and soft mobility (component 3.1 ‘Cycling and walking infrastructure’). Investing in cycling infrastructure seeks to bring benefits in terms of jobs and growth and reduce health risks associated with sedentary lifestyles. Component 3.2 ‘Modal shift’ aims to improve the provision of public transport services to make public transport an attractive alternative to the use of personal cars and reduce congestion and greenhouse gas emissions. These investments also aim to improve public health through reduced pollution and noise, increased safety and more active lifestyles. Support is also proposed for a modal shift from road freight to inland waterways and rail freight. Component 3.3 ‘greening road transport’ presents measures to accelerate the transition towards cleaner, mainly electric, car and bus fleets. Measures proposed include a reform of the company car scheme and the introduction of new incentives for the electrification of transport, complemented by investments in the development of charging infrastructure and greener bus fleets. Strengthening social cohesion and living together by ensuring effective and inclusive education systems and the inclusion of the most vulnerable groups, is the fourth strategic focus of the plan (Axis 4). Component 4.1 ‘Education 2.0’ aims to improve the overall performance and inclusiveness of education systems in Belgium. Particular emphasis is placed on the acquisition of skills — including digital STEM skills — in line with labour market needs. The component also aims to combat early school leaving and support those who have fallen behind at school. Component 4.2 ‘Training and employment of vulnerable groups’ aims at fostering the participation of vulnerable groups (low-skilled, women, people with a migrant background, people with disabilities) to the labour market. The component includes measures to boost the employability of the most vulnerable groups, including by reducing digital inequalities. Component 4.3 ‘Social infrastructure’ seeks to address the lack of social housing for most vulnerable groups and increase early child care provision, in particular for vulnerable households. Component 4.4 ‘End of career and pensions’ focuses on reforming the pension system and end of careers, with a view to increasing the activity and employment rate of older workers. The fifth axis seeks to strengthen: smart and sustainable growth by improving labour market functioning, the competitiveness of businesses by supporting research and innovation, and the circular economy, especially for businesses (Axis 5). Component 5.1 ‘Labour market and training’ aims to increase the employment rate while ensuring an inclusive labour market, with measures focused on skills acquisition in line with current and future labour market needs, including the green and digital transition. The plan refers to the preparation of a broad tax reform that notably aims at reducing labour taxation. However, no commitment on the adoption by the Parliament is provided in the plan for that reform. Labour market participation is to be stimulated through training, activation and coaching. Component 5.2 ‘Supporting the economy’ supports research and innovation to develop the country’s future economic potential, and foster the development of activities that offer promising opportunities in terms of added-value creation. In addition, it supports the implementation of efficient production processes based on emerging technologies and the transition to a shorter, more sustainable food chain. Finally, component 5.3 ‘Circular economy’ fosters the transition to a circular economy to address climate and environmental risks, to strengthen resilience to international price fluctuations and foreign supply, and to foster social resilience by creating local employment opportunities. The sixth main objective of the plan is to improve the composition of public expenditures (Axis 6). Spending reviews conducted at all level of governments are expected to support this objective under the only component of this axis (component 6.1 ‘Spending reviews’). The aim is to improve expenditure control to make it possible to release resources for new policies, including growth- and environmentally friendly expenditure, or to help fiscal consolidation, particularly in the context where fiscal space is limited, and to ensure Belgium’s fiscal resilience. The timeline of the plan is somewhat frontloaded, as a large share of investments will be made during the first years of the RRF period. However, there is still a share of investments which are expected to be achieved only in 2026, which could in part be explained by the fact that some large-scale projects will take several years to be completed.



3.2.Implementation aspects of the plan Consistency with other programmes The Recovery and Resilience Plan of Belgium provides justification for its consistency with the objectives and priorities of other initiatives. The plan contributes to the objectives of the National Energy and Climate Plan and is complementary to the forthcoming Partnership Agreement with Belgium due to be submitted in 2021 and the programmes for the implementation of the Structural Funds, and the Youth Guarantee plans. As regards the Multiannual Financial Framework 2021-2027, the Partnership Agreement with Belgium and the Operational programmes for the implementation of the Structural Funds are still under preparation. The plan stipulates that their structure shall, among others, reinforce and complement the projects supported by the RRF to optimise the use of all the European funds allocated to Belgium. This seems particularly relevant for areas where investments that will be kick-started with RRF support could also benefit from support under ERDF and ESF+ to increase their long-term impact. The plan intends to ensure complementarity of funding and avoidance of double funding in the Regions and Communities. The implementation of the Structural Funds will run in parallel with the RRF under their own rules and eligibility timeframe. The investments and reforms included in the Belgian recovery and resilience plan fit a broader national recovery strategy, pursued at the different levels of government in Belgium. The federal investment and reform projects fall within the broader framework of the Federal government’s recovery strategy and will be integrated into the Investment Recovery Plan as provided for in the Government Agreement. The Federal government has set up a EUR 750 million Transformation Fund within the Federal Holding and Investment Company which will invest in the first five axes defined under the plan. Flanders defined its Resilience plan ‘Veerkracht Vlaanderen’) worth EUR 4.3 billion in September 2020. The projects worth EUR 2.25 billion of the Flemish Government as part of the Recovery and Resilience Plan are all part of the Flemish resilience plan. The Walloon projects under the Recovery and Resilience Plan also supports Wallonia’s own recovery strategy ‘Get Up Wallonia’. The Brussels government adopted its recovery and redeployment plan for the Brussels-Capital Region in response to the COVID-19 crisis in July 2020, complemented by additional stimulus and redeployment measures. These investment projects were incorporated as a priority in the Belgian recovery and resilience plan. The German-speaking Community’s contribution to the Belgian recovery plan is linked to the regional strategic development plan ‘Regionale Entwicklungskonzept’ and more specifically the strategic visions for ‘Ostbelgien Leben 2025’.



Consistency with the Commission Recommendation for a Council Recommendation on the economic policy of the euro area The Belgian plan is broadly consistent with the challenges and priorities identified in the Commission Recommendation for a Council Recommendation on the economic policy of the euro area (EAR). It contributes to EAR 1, to ensure a policy stance which supports the recovery, by pursuing reforms to strengthen the coverage, adequacy and sustainability of social protection systems, most notably in the area of pensions. The pension reform included in the plan aims to reinforce the insurance principle of the pension system by increasing minimum pensions and strengthening the link between contributions and benefits. To ensure the long-term financial sustainability of the system, different measures are being considered in the context of the reform to incentivise older workers to remain active on the labour market such as the introduction of part-time pensions, the introduction of a pension bonus, increased investment in life-long learning and the facilitation of career reorientation for older workers. The plan also contributes to the improvement of public finances management through the systematic integration of spending reviews in the budget planning cycles at regional, community and federal government levels with a view to improving public spending efficiency. With respect to EAR 2 to improve convergence, resilience and sustainable and inclusive growth, reforms and investments in the plan are expected to support overall productivity and an improved efficiency of the public administrations’ action. This should foster private investment to address the recovery and the twin green and digital transition. In parallel, efforts will be made to match the skills of human capital with labour market needs through the modernisation of education and training systems, and to promote effective active labour market policies. When it comes to EAR 3 to strengthen national institutional frameworks, the plan also provides for important measures to modernise and digitise public administrations. In the area of business environment, some measures aim to remove unnecessary or disproportionate administrative barriers to business creation and growth. Administrative organisation The Secretary of State for Recovery and Strategic Investments is responsible for coordinating the implementation of the plan at inter-federal level. The Secretary of State will remain the technical contact point with the European Commission in the implementation phase of the recovery and resilience plan. The administrative follow-up of the plan will be carried out by an inter-federal Monitoring Committee, composed of representatives of all the entities responsible for the reporting and administrative follow-up of projects under their responsibility. The Committee will be chaired by the permanent secretariat of the Federal Public Service Policy and Support (BOSA) which shall ensure continuity of overall coordination of the plan and technical contacts with the European Commission, in collaboration with the Secretary of State for Recovery and Strategic Investments. The Monitoring Committee will monitor the implementation and achievements of the plan, coordinate the preparation of each payment request, identify risks of not meeting milestones and targets and propose solutions if risks materialise. Gender equality and equal opportunities for all With regard to gender equality and equal opportunities for all, the plan follows a dual approach of responding to the consequences of the pandemic and addressing more structural factors leading to inequalities. Even though Belgium scored 3.5 points higher than the EU average on gender equality in 2020, certain challenges persist in areas including lower labour market participation of women, in particular for those with a non-EU migrant background. Moreover, considerably less women have STEM degrees and use digital public services compared to the EU average. The Belgian Institute for the Equality of Women and Men considers that 18% of investments under the plan will have a positive impact on gender equality and about 52% will have a potential positive impact on gender equality. Considering that a number of investments could potentially create a significant short-term demand for labour in currently male-dominated sectors like the construction sector, Belgium should effectively monitor that its implementation is aligned with the objective of promoting gender equality. In this context, Belgium has indicated in the plan that the Consultation Committee will encourage all entities to closely monitor the impact of projects on gender equality and to consider the necessary accompanying measures. The plan contains a number of dedicated measures to address challenges to ensure equal opportunities for all and to reach the European Social Pillar Action Plan objectives by 2030. It promotes the integration of gender equality and equal opportunities in a number of reforms and investments across the plan, including in relation to the green and digital transition. Although the plan falls short of presenting a holistic and integrated approach to support social and labour market inclusion for vulnerable groups, it does include a set of measures dedicated to supporting the inclusiveness of education systems and to promoting social integration and inclusion in the labour market. Consultation process

As outlined in the plan, Belgium has consulted a wide range of stakeholders in the plan’s adoption process to increase national ownership of the plan. The different Belgian entities have defined autonomously and with due regard to their competences, the arrangements for involving a wide range of stakeholders including social partners, civil society and other stakeholders in the design of the measures under their responsibility. At the federal level, many stakeholders were consulted, including social partners, civil society and the gender equality body. The federal government set up an advisory committee, consisting of the Central Economic Council (with the support sometimes of the National Labour Council) and the Federal Council for Sustainable Development, bringing together social partners and civil society (environmental organisations, organisation for development cooperation, consumer organisation, youth organisations and the scientific world) that provided advice at different stages in the plan’s preparation process. Moreover, the Institute for the Equality of Women and Men was consulted to assess the impact of the plan on gender equality and formulate recommendations. Regional and community governments consulted social partners on their respective reform and investment projects, and also exchanged with regional parliaments. The Flemish government consulted the Flemish social partners organised in the Social and Economic Council of Flanders (SERV) and exchanged with the Flemish Parliament on the Plan. In the context of a presentation on the overall Flemish recovery plan, the Flemish government also answered stakeholders’ questions on projects intended to be financed by the Recovery and Resilience Facility. The Walloon government requested the opinion of the Economic, Social and Environmental Council of Wallonia, which brings together representatives of employers’, trade unions and environmental organisations. The Walloon government also addressed questions from the Parliament of Wallonia on the process and substance of the plan. In the Brussels-Capital Region, the consultation process with social partners (Brupartners) was organised around the elaboration of the GO4Brussels 2030 Strategy, and its adaptation to take into account the measures for Brussels that were integrated in the plan. The French Community government also consulted stakeholders notably in the education field and exchanged with the entity’s parliament The German-speaking Community government consulted social partners (Economic and Social Council of the German-speaking Community), as well as other relevant stakeholders and exchanged with the Parliament, in the course of committee and plenary hearings. Belgium is committed to continue to reach out to social partners and civil society during the implementation phase of the plan. Cross-border and multi-country projects The Belgian plan contains a number of investment measures with a significant cross-border dimension. In component 1.2, this applies notably to the three measures (at federal, Flemish and Walloon level), which jointly focus on supporting an industrial value chain in the field of hydrogen (I-1.15, I-1.16, I-1.17). A prominent part of these investments will form part of the planned wider cross-border Important Projects of Common European Interest (IPCEI) on hydrogen. Likewise, the investment project ‘Backbone for H2 and CO2’ (I-1.14) of the federal level foresees creating future interconnections with neighbouring countries of the initial H2 and CO2 transport networks that are part of the plan. Finally, the investment measure ‘Off-shore energy island’ (I-1.21) aims at developing a multifunctional offshore energy hub (‘energy island’) in the Belgian part of the North Sea. Among other things, this energy hub is to facilitate the integration and import of more renewable energy in and around the North Sea by connecting to other countries or regions. In component 5.2, Flanders’ measure to strengthen R&D includes an envelope earmarked to finance the potential participation of Flemish businesses to the planned IPCEI on microelectronics. Communication strategy The Belgian plan outlines the main elements of its communication strategy. Each entity will remain responsible for its own communication strategy and for ensuring compliance with the communication requirements of the RRF Regulation and the Commission’s guidance. However, to ensure communication consistency across entities, Belgium will set up a dedicated website for the Belgian recovery and resilience plan in Dutch, French, German and English to present the measures and the components of the plan per thematic axis, per region/province and per competent entity in an interactive way. The website, which is expected to be operational by the end of July 2021, will be regularly updated with information on the implementation of the measures. In addition, the plan states that several entities can organise coordinated outreach activities. In addition, a three-year recovery and resilience plan communication strategy will be developed, consisting of strategic annual communication plans and quarterly operational planning of the communication items to be implemented (such as the media plan, the types of outreach events to be organised, the target audience, the objectives and format of the outreach events). Belgium intends to organise a launch event to give maximum visibility to the recovery and resilience plan to a multitude of stakeholders including journalists, civil society organisations, industry, political actors (at federal, regional, community and local levels), financial actors, and EU institutions. In addition, Belgium aims to organise bi-annual events that are to coincide with the publication of interim EU implementation reports on the plan. State aid State aid and competition rules fully apply to the measures funded by the Recovery and Resilience Facility. Union funds channelled through the authorities of Member States, like the RRF funds, become State resources and can constitute State aid if all the other criteria of Article 107(1) TFEU are met. When this is the case and State aid is present, these measures must be notified and approved by the Commission before Member States can grant the aid, unless those measures are covered by an existing aid scheme or comply with the applicable conditions of a block exemption regulation, in particular the General Block Exemption Regulation (GBER) declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 TFEU. When State aid is present and it requires notification, it is the duty of the Member State to notify State aid measures to the Commission before granting them, in compliance with Article 108(3) TFEU. In this respect, the State aid analysis carried out by Belgium in the recovery and resilience plan cannot be deemed a State aid notification. In as far as Belgium considers that a specific measure contained in the recovery and resilience plan entails de minimis aid or aid exempted from the notification requirement, it is the responsibility of Belgium to ensure full compliance with the applicable rules. Measures in the plan should also be compatible with the EU’s international obligations, in particular under World Trade Organization rules. 4.Summary of the assessment of the plan 4.1.Comprehensive and adequately balanced response to the economic and social situation The plan follows a holistic approach to foster the recovery, addressing many challenges related to all six pillars. The plan contains 140 measures (35 reforms and 105 investments) that refer to the policy areas of European relevance structured in the six pillars on the basis of which the scope of the RRF is defined. The plan is expected to contribute to tackling key structural challenges and to contribute to the green and digital transition.The coverage of the six pillars by the Belgian plan’s components is summarized in Table 5. All pillars are covered by several components while a component may contribute to several pillars. Table 5 – Coverage of the six pillars of the Facility by Belgian recovery and resilience plan components Components of the Plan Pillars of the Recovery and Resilience Facility Green transition Digital transformation Smart, sustainable and inclusive growth Social and territorial cohesion Health, and economic, social and institutional resilience Policies for the next generation, children and young people Axis 1 1.1.Renovation of buildings ● ● ● ○ 1.2.Emerging energy technologies ● ○ ● 1.3.Climate & Environment ● ○ ○ Axis 2 2.1.Cybersecurity ● ● 2.2.Public administration ● ● ● ● 2.3.Fibre optic, 5G and new technologies ● ● ● Axis 3 3.1.Cycling and pedestrian infrastructure ● ● ● ○ 3.2.Modal shift ● ● ● ● 3.3.Greening road transport ● ● ● Axis 4 4.1.Education 2.0 ● ● ● ● ● 4.2.Training and employment for vulnerable groups ● ● ● ● ○ 4.3.Social infrastructure ○ ○ ● ● ● ○ 4.4.End of career and pensions ● ● Axis 5 5.1.Training and labour market ○ ● ● ● ● ○ 5.2.Support for economic activity ○ ○ ● ● 5.3 Circular Economy ● ● ● Axis 6 6.1.Spending reviews ● Key: “●” investments and reforms of the component significantly contribute to the pillar; “○” the component partially contributes to the pillar The plan is overall balanced and meets the minimum thresholds for the green and digital pillars. The plan is comprehensive in addressing the different pillars, in a broadly balanced way. 1st Pillar: Green transition The plan extensively covers the ‘first pillar’, with more than half of its components (10 out of 17 components) being directly related to the green transition. Measures in the plan are expected to help accelerate the implementation of the Belgian National Energy and Climate Plan (NECP) for 2021-2030. A broad range of measures contribute directly or indirectly to the green transition, favour biodiversity and environmental protection. In order to implement climate-related policy measures, such as in the areas of energy transition and adaptation to climate change, the plan envisages taking a broad range of measures that can be grouped in the following major areas:

·Renovations and energy-efficient constructions of buildings (component 1.1, as well as energy-efficient renovations of training facilities in component 5.1); ·Emerging energy technologies (component 1.2) with investments in renewable energy (energy island), the hydrogen value chain and a hydrogen and carbon backbone, and accompanying legal and fiscal frameworks; ·Sustainable mobility (components 3.1, 3.2, 3.3) with measures developing soft mobility infrastructure, modal shift in particular towards rail and the greening of road transport; ·Biodiversity and the protection of the environment (Component 1.3) in particular with projects on water management and biodiversity in Flanders and sustainability of forests and restoration of biodiversity in Wallonia; ·Circular economy (component 5.3); ·Support to economic activity (component 5.2) with measures to support R&D and the green transition in the food sector; ·Skills for the green transition (component 5.1); with renovation and equipment of training facilities notably in support of acquisition of skills for the green transition; ·Social infrastructure (component 4.3) through the energy-efficient renovation of child care facilities. Measures contributing to the climate target exceed the minimum threshold required under the Recovery and Resilience Facility. Based on the methodology for climate tracking set out in Annex VI of Regulation (EU) 2021/241, 49.6% of the plan contributes to the climate target, measured as the total estimated cost of the contributing actions as a percentage of the total allocation, thereby complying with the minimum threshold of 37%, with a direct contribution from 10 of the 17 components. 2nd Pillar: Digital transformation The plan covers the ‘second pillar’ on digital transformation, with eleven components directly contributing to Belgium’s digital transformation through investments and reforms. These measures are aligned with European digital policy initiatives such as the European digital strategy, the European skills agenda, the European Pillar of Social Rights, the European Single Digital Gateway, the European Education Area and the digital education action plan and the European Health Data Space. The plan addresses digital-related challenges in the three components in the digital transformation axis. The plan aims at developing cybersecurity capabilities (2.1), improving the efficiency of public services through digitalisation to the benefit of both individual and business end-users (component 2.2), and developing digital gigabit connectivity (component 2.3). Reforms contained in component 5.2 also contribute to develop digital gigabit connectivity by removing regulatory bottlenecks in line with the planned review of building and environmental permits procedures. Additional components contribute to developing digital skills and digital inclusion in Belgium. The plan includes measures to increase the effective use of technology and digital learning tools in schools and higher education institutions (component 4.1), increase digital skills of the adult population, including vulnerable groups (component 4.2), use technology in social housing to delay or avoid that people in loss of autonomy move to eldercare facilities (component 4.3) and develop training facilities and training programmes, with a focus on the digital transition (component 5.1). Some measures under the mobility, productivity and sustainability axes also contribute to the digital transformation. Component 3.2 Modal shift is expected to contribute to the digital transformation, thanks to measures to develop mobility-as-a-service and smart mobility. Measures in component 5.3 include investments in digital solutions within circular economy projects and measures including possible actions on eco-design of electronics which may contribute to the greening of the digital sector. Component 1.2 includes investments in digital technologies to support the energy transition. Measures contributing to the digital transition exceed the minimum threshold required under the Recovery and Resilience Facility. Based on the methodology for digital tagging set out in Annex VII of Regulation (EU) 2021/241, 26.6% of the plan contributes to the digital target, measured as the total estimated cost of the contributing actions as a percentage of the total allocation, therefore complying with the minimum threshold of 20%, with a direct contribution from 11 components out of 17. 3rd Pillar: Smart, sustainable and inclusive growth, including economic cohesion, jobs, productivity, competitiveness, research, development and innovation, and a well-functioning internal market with strong SMEs The plan extensively covers the ‘third pillar’, with nearly all components contributing to its different policy areas. The plan contributes to ensuring smart, sustainable and inclusive growth. Several components are expected to enhance the productive capacity of the economy (2.1, 2.3, 5.1, 5.2), while components 1.1, 1.2, 1.3 and 5.3 promote sustainable growth, as well as climate mitigation and adaptation. Components 4.1, 4.2, 4.3 and 5.1 promote inclusive growth. Several components of the plan are expected to contribute to economic cohesion, jobs, productivity and competitiveness. Components 5.1 and 5.2 have the potential to enhance productivity growth. Components 4.1, 4.2 and 4.3 relate to economic cohesion.

Research, development and innovation measures are included in different components of the plan. While component 5.2 directly relates to research, innovation, new technologies and decarbonisation, component 4.1 is linked to the digital transformation of the education systems. Components 1.2 and 5.3 relate to innovation and new technologies for clean energy production and the development of the circular economy. Finally, the plan contains several measures that are expected to contribute to a well-functioning internal market with strong SMEs. Component 2.2 promoting the digitalisation of public services, is expected to improve the effectiveness of the justice system, and support a well-functioning internal market (e.g. Single Digital Gateway, which facilitates the application of the ‘Only-Once principle’, and the interoperability of eID for cross-border suppliers and service providers). The component also contains measures to support the digital transformation of the social security, including facilitating the communication with the social security of other EU Member States, and therefore contributing to the mobility of the labour force. Component 2.1 contributes to the digital transformation of SMEs through support to increase their cybersecurity readiness. Component 5.1 and 5.2 supports startups and SMEs, through incubation and support to innovative activities. Component 1.2 supports the development of hydrogen capacity and transmission infrastructure. 4th Pillar: Social and territorial cohesion The plan covers the ‘fourth pillar’, with a majority of components being directly related to ‘social and territorial cohesion’. Strengthening social cohesion is one of the key objectives of the plan, in particular addressed under the fourth axis of the plan which notably aims at the inclusion and integration of disadvantaged groups. Territorial cohesion is predominantly addressed with measures tailored to meet the specific challenges that each region faces in Belgium, although more efforts could have been made to ensure coherence in the plan. A significant part of the measures was defined at regional level to address specific regional challenges and the share of the fund going to the different Regions appears broadly adequate. Synergies with the upcoming Cohesion Policy programmes are also expected. The plan also includes measures intended to enhance territorial cohesion, notably thanks to investment in sustainable mobility and digital infrastructure. Investments into railways, smart mobility and cycling and walking paths cover the whole territory and reinforce the integration of transport networks. The development of inland waterways in Wallonia is expected to improve overall connectivity of the country. Belgium has also committed to complete its cross-regional suburban rail network (measure R-3.01). The deployment of charging infrastructure throughout Belgium is also supported. Finally, the plan intends to ensure the even roll-out of 5G infrastructure in all regions, notably by revising the regional radiation standards if considered necessary and recommended by the relevant committees. Moreover, the plan contains two fibre deployment infrastructure projects in white zone areas, contributing to territorial cohesion between urban and rural areas in this way. Strengthening social cohesion is one of the key objectives of the plan. It is in particular addressed under its fourth axis, which notably aims at the inclusion and integration of vulnerable groups. Component 4.1 intends to improve the overall performance and inclusiveness of education systems in Belgium. Component 4.2 includes measures to increase participation of vulnerable groups in the labour market (low-skilled, women, people with a migrant background, people with disabilities). Component 4.3 contributes to addressing the lack of social housing for vulnerable groups early childhood care, in particular for vulnerable households. The reform of the pension and end of careers (component 4.4) would among others aim to ensure adequacy of social security while addressing fiscal sustainability concerns. The plan includes investment and reform measures to tackle unemployment, notably by fostering training and life-long learning. The risk of poverty in Belgium is strongly correlated to the high share of low work intensity households. The plan includes several measures to strengthen labour market participation, notably by increasing and improving the training offer, including towards jobs in shortages, fostering life-long learning and adapted support to jobseekers by the public employment services (component 5.1). The plan includes several additional components which are expected to promote social cohesion in particular through measures on digital inclusion (components 5.1 and 2.3), access to digital public services (component 2.2), renovation of social housing, schools, universities, sport, youth and cultural infrastructure, training facilities (component 1.1), and measures promoting a modal shift, by decreasing reliance on personal use of motor vehicles whose associated costs contribute to poverty (component 3.2). 5th Pillar: Health and economic, social and institutional resilience, with the aim of increasing crisis preparedness and crisis response capacity, among others The plan extensively covers the ‘fifth pillar’, with about half of all components being directly related to it. Several measures, especially under the fifth axis of the plan, are expected to contribute to increasing economic resilience. The plan includes measures to strengthen productivity of firms, especially SMEs and innovative companies, and to support the digital transition, R&D and innovation and increase competitiveness (see sub-section on smart, sustainable and inclusive growth). The digital axis of the plan is expected to help improving business and public service continuity, as well as the effectiveness of the justice system. A component of the plan is dedicated to increasing resilience to cyberattacks (component 2.1). The plan also contains measures to accelerate the digitalisation of justice and decreasing the administrative burden by digitalising public services (component 2.2). Social resilience should notably be promoted by the components under the fourth and fifth axes which are oriented towards employability, including vulnerable groups, and enhancing skills. As discussed in the previous sub-section on social and territorial cohesion, the plan has a strong focus on building social resilience. The plan includes investments in e-health solutions to reinforce the overall resilience of the health system. Moreover, the plan aims to support training and innovation in the health and biotech sector in Belgium. The plan contains measures that are expected to contribute to increasing the institutional resilience of Belgium, notably through development of cybersecurity capabilities (component 2.3), the modernisation and digitalisation of public services, including the justice system (component 2.2) and the introduction of spending reviews (component 6.1).



6th Pillar: Policies for the next generation, children and young people, such as education and skills The plan covers the ‘sixth pillar’, with several components directly related to it, therefore contributing adequately to its overall coherence. The plan presents a number of measures with a direct impact on children and young people, including:

·The development of global action plan against early school leaving and personalised support for pupils in school in the Federation Brussels-Wallonia, and of an agile and future-proof higher education offer in the Flemish Community (component 4.1) ·The renovation of schools and universities, as well as the renovation of sport infrastructure and of facilities for the youth in the French Community (component 1.1) ·Investment in the digital infrastructure and equipment of the education system (components 2.3 and 4.1) ·Renovation and development of training facilities, as well as measures supporting digital inclusion and digital training offer in Wallonia (component 5.1) ·Increase in the capacity of childcare facilities in Wallonia (component 4.3) ·Increase in flexible temporary childcare for jobseekers in the Brussels-Capital Region, for parents and/or single parents having just found a job or enrolled in training (component 4.2) ·Cycling infrastructure, notably benefiting young people with no or little access to personal cars (component 3.1) Conclusion Taking into consideration all reforms and investments envisaged by Belgium, its recovery and resilience plan represents, to a large extent a comprehensive and adequately balanced response to the economic and social situation, thereby contributing appropriately to all six pillars referred to in Article 3 of the RRF Regulation, taking the specific challenges and the financial allocation of Belgium into account. This would warrant a rating of A under the assessment criterion 2.1 in Annex V to the RRF Regulation. 4.2.Link with country-specific recommendations and the European Semester The plan is expected to effectively contribute to addressing a significant subset of challenges faced by the Belgian economy. The plan introduces reforms and investments aimed at providing a response to some long-lasting challenges that the Belgian economy is facing, notably in the areas of public finances and the composition and efficiency of public spending, overall labour market performance and skills development, investment in sustainable transport, the energy transition, research, innovation and new technologies and digital infrastructure. The plan also comprises reforms and investment intended to reduce the regulatory and administrative burden and improve the business environment. Table 6 - Mapping of country challenges identified in 2019-20 country-specific recommendations (CSR) and the Belgian recovery and resilience plan components Country challenges (as identified in Section 2) Associated CSR (2019-2020) and European Semester recommendations C 1.1 C 1.2 C 1.3 C 2.1 C 2.2 C 2.3 C 3.1 C 3.2 C 3.3 C 4.1 C 4.2 C 4.3 C 4.4 C 5.1 C 5.2 C 5.3 C 6.1 Public debt sustainability 2019.1 Sustainability of pension regimes, end of career 2019.1 ● ○ Efficiency of public spending, spending reviews 2019.1 ○ ● Better coordination of fiscal policies 2019.1 Remove disincentives to work 2019.2 ○ Strengthen effectiveness of active labour market policies in particular for the low skilled, older workers and people with a migrant background 2019.2, 2020.2 ● ● Address skills mismatches, improve training systems 2019.2, 2020.2 ● ● ● Improve the performance and inclusiveness of the education system 2019.2 ○ ● Invest in sustainable transport infrastructure 2019.3, 2020.3 ● ● Reinforce incentives and remove barriers to increase the supply and demand of collective and low emission transport 2019.3, 2020.3 ● ● Clean and efficient production and use of energy 2019.3, 2020.3 ● ● ● ● ● ● ○ ● ○ Circular economy 2020.3 ● Digital infrastructure, i.e. 5G and Gigabit Networks 2019.3, 2020.3 ● Invest in research & innovation, in particular in digitalisation 2019.3, 2020.3 ○ ● ● ○ ● ● Improve the business environment 2019.4, 2020.3 ● ● ○ ○ Reduce the regulatory and administrative burden 2019.4 ● ○ ○ ○ Competition in services 2019.4 Key: “●” investments and reforms of the component significantly address the challenge; “○” the component partially addresses the challenge



Fiscal sustainability of long-term care and pensions systems Risks to the overall fiscal sustainability of public finances are significant in the medium to long-term in Belgium. The medium- and long-term sustainability of Belgium’s public finances is at risk due to the combination of a high debt-to-GDP ratio and the projected rise in ageing costs, in particular those linked to pensions and long-term care. Public expenditure on pensions would increase b