Council Opinion of 18 February 2003 on the updated stability programme of Belgium, 2003 to 2005
Date: 2003-02-18
Institutions: Council of the European Union
Subjects: Belgium, budget policy, economic policy, gross domestic product, stability programme

5.3.2003

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Official Journal of the European Union

C 51/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 18 February 2003

on the updated stability programme of Belgium, 2003 to 2005

(2003/C 51/01)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 1466/97 of 7
July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic
policies (1), and in particular Article 5(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 18 February 2003 the Council examined the 2002 update
of the stability programme of Belgium, which covers the period
2003 to 2005. The programme broadly complies with the
the code of conduct on the content and
requirements of
format of
the
Council considers that the economic policies as reflected in
the programme update comply partly with the recommen-
dations of the Broad Economic Policy Guidelines.

the stability and convergence programmes;

The Council notes that economic activity remained weak in
2002 as real GDP growth is estimated at 0,7 % as against
1,3 % projected in the 2001 update. The impact of economic
slowdown on public finances was contained in 2002 and the
general government accounts reached balance after recording a
surplus of 0,2 % of GDP in 2001 (or a surplus of 0,4 % of GDP
if UMTS receipts are included). In 2001 and 2002, the decline
in the government debt ratio continued, but reached only 3,5
percentage points of GDP, decelerating as a result of low GDP
In
growth but also to debt-increasing financial operations.
2002, the debt ratio was still at a high level, 106,1 % of GDP.

According to the updated programme, economic recovery is
expected to be progressive, gaining momentum during 2003
supported by
and remaining robust
trade
recovery
and sustained domestic
in international
is projecting 2,1 % real GDP
demand. The programme

in subsequent years,

(1) OJ L 209, 2.8.1997.

growth in 2003, which appears to be subject to downside risks
in light of recent international developments, and more robust
but plausible growth, at 2,5 % in 2004 and 2005.

The 2002 update of the stability programme is projecting a
balanced general government position in 2003 and surpluses
of 0,3 % and 0,5 % of GDP, respectively, for 2004 and 2005.
The
targeted budgetary
compared to the
adjustment in the previous update would be partly recovered
by a somewhat faster adjustment during 2004 and 2005.

ground lost

that

in 2002,

The Council notes
cyclically-adjusted balance,
the
calculated by the Commission on the basis of the production
function method, after improving considerably, by 0,5 % of
GDP,
is projected to remain practically unchanged
reaching an estimated
during the period 2003 to 2005,
surplus between 0,2 % and 0,3 % of GDP. Consequently, the
Council notes with satisfaction that Belgium continues to be in
conformity with the requirement of the stability and growth
pact to reach a budgetary position of close to balance or in
surplus in the medium term.

The Council notes that the government debt ratio is projected
to decline by about 4 percentage points of GDP per year over
the period considered by the 2002 update, to 93,6 % of GDP
in 2005. However, the planned assumption of debt of public
enterprises by the State in 2004 to 2005, mentioned in the
programme, may temporarily reduce
the pace of debt
reduction. The Council considers it necessary to maintain the
government debt ratio on a sustained declining trend.

The Council notes that the budgetary strategy implied by the
2002 update continues to be based on the achievement of high
primary surpluses combined with declining interest payments
over the period of the programme; the Council commended, in
past opinions, such a strategy which, based on effective control
of expenditure growth, has proved successful
in eliminating
budgetary deficits and allowing a significant reduction in the
government debt ratio. The Council notes, however, that the
primary surpluses projected in the current programme, at
around 5,5 % of GDP per year are lower than those, above
6 % of GDP, realised in recent years; moreover, the Council
notes the Government's intention to implement the 1,5 % limit
on real expenditure growth for Entity I (including the Federal
Government and Social Security), even though no mention is
made of it in the current update . The Council urges the
Belgian authorities to stick to this limit over the programme
period.

C 51/2

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Official Journal of the European Union

5.3.2003

The Council considers that the fiscal consolidation projections
in the 2002 updated programme represent the minimum effort
required in order to meet the challenge of a rapid reduction in
the still very high debt ratio and to prepare for the budgetary
implications of population ageing. The Council considers that,
given projected real GDP growth accelerating to 2,1 %, further
budgetary adjustment would be warranted in 2003. The
Council recommends to the Belgian authorities to seek every
opportunity to realise further budgetary adjustment in 2003
and in subsequent years. The Council urges the Belgian auth-
orities to maintain primary surpluses at around 6 % of GDP per
year and to continue to respect the limit of 1,5 % per year on
real primary expenditure growth for Entity I, over the period
covered by the programme.

The Council welcomes the measures adopted in 2001 with a
view to improving the monitoring of
the sustainability of
public finances as part of
the annual budgetary planning
process, which include regular assessments of the budgetary
impact of ageing populations. On the basis of current
sustaining high
policies, and in particular
primary surpluses, Belgium should be able to meet
the
budgetary costs of ageing populations. However, it should be
borne in mind that long-run budgetary developments in a high
debt country like Belgium are very sensitive to medium-term
budget target being achieved and sustained over the long-run.

the policy of

A failure to continue the policy of running large primary
surpluses would mean that the risk of unsustainable public
finances could not be excluded. To ensure the sustainability
of public finances, debt reduction needs to be complemented
with measures to raise employment rates, especially amongst
older workers as the effective retirement age is one amongst
the lowest of all EU countries.

administrative procedures

The Council notes with satisfaction the progress made in
implementing structural reforms including draft legislation for
the
setting up the framework for supplementary pensions,
simplification of
for business
activity and continued implementation of tax reform aimed
and
at
encouraging employment creation. The Council deems
it
important
reforms,
the budgetary cost of
notably those involving tax and non-tax burden reduction, be
kept consistent with the targeted budgetary adjustment and the
reduction of the government debt ratio be ensured.

the performance

improving

structural

economy

that

the

of

The Council welcomes the renewed agreement between the
various parts of government to set budgetary objectives and
the commitment
the Council
stability programmes’ particularly
considers
appropriate in the federal institutional framework of Belgium.

to ensure their achievement;

such ‘internal

COUNCIL OPINION

of 18 February 2003

on the updated convergence programme of Denmark, 2002 to 2010

(2003/C 51/02)

THE COUNCIL OF THE EUROPEAN UNION,

After consulting the Economic and Financial Committee,

Having regard to the Treaty establishing the European
Community,

HAS DELIVERED THIS OPINION:

Having regard to Council Regulation (EC) No 1466/97 of 7
July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic
policies (1), and in particular Article 9(3) thereof,

Having regard to the recommendation of the Commission,

(1) OJ L 209, 2.8.1997.

On 18 February 2003 the Council examined Denmark's
updated convergence programme, which covers the period
2002 to 2010. The programme is
rich in information
especially with regard to the amount of data provided for
the analysis of medium- and long-term challenges of
the
Danish public finances and complies with the code of
conduct. The economic policies as reflected in the planned
measures in the convergence programme update comply with
the 2002 Broad Economic Policy Guidelines.