COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and stability programme for BELGIUM Accompanying the document Recommendation for COUNCIL RECOMMENDATION on Belgium's 2012 national reform programme and delivering a Council opinion on Belgium's stability programme, 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Belgium, banking system, budget deficit, competitiveness, economic situation, inflation, labour market, pay policy, public debt, social security, structural adjustment, unemployment

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 314 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and stability programme for 
BELGIUM 

Accompanying the document 

Recommendation for  

COUNCIL RECOMMENDATION 

on Belgium's 2012 national reform programme and delivering a Council opinion on 
Belgium's stability programme, 2012-2015 

{COM(2012) 314 final} 

EN 

   EN 

 
 
 
 
  
 
 
CONTENTS 

EXECUTIVE SUMMARY ................................................................................................. 3 

1. 

INTRODUCTION....................................................................................................... 4 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES .......................................... 5 

2.1.  Recent economic developments and outlook .................................................... 5 

2.2.  Challenges ......................................................................................................... 6 

3.  ASSESSMENT OF THE POLICY AGENDA ........................................................... 9 

3.1.  Fiscal policy and taxation.................................................................................. 9 

3.2.  Financial sector................................................................................................ 14 

3.3.  Labour market, education and social policy.................................................... 16 

3.4.  Growth and competitiveness structural measures ........................................... 19 

3.5.  Modernisation of public administration .......................................................... 24 

4.  OVERVIEW TABLE................................................................................................ 26 

ANNEX ............................................................................................................................. 32 

2

 
 
 
EXECUTIVE SUMMARY 

In 2012, Belgium's GDP is expected to remain broadly flat in the first half of the year, 
followed  by  a  modest  export-led  recovery  from 
third  quarter  onwards. 
Unemployment  is  expected  to  gradually  increase  from  7.2%  in  2011  to  around  8%  in 
2013. 

the 

Belgium has recently adopted reforms, including in key areas such as the labour market 
and pensions. It also introduced a budget for 2012 which helped in taking forward fiscal 
consolidation. Reflecting the outstanding challenges, some of which have become more 
acute,  Belgium  has  announced  plans  to  take  further  measures  to  pursue  fiscal 
consolidation and strengthen structural reforms.  

Ensuring  the  reduction  of  the  budget  deficit  to  below  3%  of  GDP  by  2012  remains  an 
important policy challenge, as well as continuing to improve the long-term sustainability 
of public finances by curbing age-related expenditure. The evolution of competitiveness 
of  the  Belgian  economy  is  worrisome,  due  to  low  growth  in  productivity  and  rising 
labour  costs,  with  wage-setting  and  indexation  mechanisms  hampering  efforts  to  limit 
real  wage  increases.  Relative  weak  competitive  pressure  and  some  structural  barriers 
remain  in  the  retail  sector  and  in  network  industries.  There  is  room  to  complement 
initiated reforms of the unemployment benefit system in order to increase incentives to 
work, and to improve the effectiveness of active labour market policies, in particular for 
young  unemployed,  older  workers  and  non-EU  nationals.  The  financial  situation  of 
Belgian  banks  remains  fragile.  Finally,  reducing  greenhouse  gas  emissions  from  non-
ETS activities, in particular transport, also appears to be a challenge for Belgium. 

  3

 
 
 
1. 

INTRODUCTION 

Procedural aspects 

In  June  2011,  the  Commission  proposed  six  country-specific  recommendations  (CSRs) 
for  economic  and  structural  reform  policies  for  Belgium.    In  July  2011  the  Council 
adopted  these  recommendations  which  concerned  public  finances,  the  pension  system, 
the  financial  sector,  the  labour  market  and  wage  setting,  and  competition  policy,  and 
were in line with the commitments of the Belgian authorities under the Euro Plus Pact of 
March 2011. 

In November 2011, the Commission published its Annual Growth Survey for 2012 (AGS 
2012) in which it set out its proposals for building the necessary common understanding 
about  the  priorities  for  action  at  national  and  EU  level  in  2012.  It  focused  on  five 
priorities  —  growth-friendly  fiscal  consolidation,  restoring  normal  lending  to  the 
economy,  promoting  growth  and  competitiveness,  tackling  unemployment  and  social 
consequences  of  the  crisis,  and  modernising  public  administration.  It  also  encouraged 
Member States to implement them in the 2012 European Semester. 

Against  this  background,  Belgium  presented  updates  of  its  national  reform  programme 
(NRP) and stability programme in April 2012. These programmes provide details of the 
progress made since July 2011 and plans going forward. This Staff Working Document 
assesses the status of implementation of the 2011 recommendations and Euro Plus Pact 
commitments,  as  well  as  the  AGS  2012  in  Belgium.  It  identifies  current  policy 
challenges and examines the country’s latest policy plans. 

Overall assessment 

Overall,  Belgium  implemented  the  Council  recommendations  only  partially.  The 
implementation  was  to  some  extent  hampered  by  the  fact  that  the  new  federal 
government  was  not  sworn  in  until  6  December  2011,  541  days  after  the  elections  of 
13 June  2010.  The  coalition  agreement  included  institutional  reforms  and  a  budget  for 
2012, which helped in taking forward the fiscal consolidation and a number of necessary 
structural reforms in the area of the labour market and pensions. The efforts undertaken 
so far are welcome, but they need to be complemented by further reforms. 

The  challenges  which  the  country  has  to  deal  with  remain  broadly  the  same,  although 
some  of  them  have  become  more  acute.  First,  it  is  important  to  ensure  that  public 
finances stay on track. In the short term, this means bringing the deficit below the level 
of  3   %  of  GDP  by  2012  and  this  in  a  sustainable  way,  in  line  with  the  EDP  and  the 
Council’s  2011  recommendation.  In  the  longer  run,  ageing  costs  will  need  to  be 
addressed and a structural decline in the deficit has to be achieved in order to bring the 
high public debt back onto a downward path. Underpinning the ongoing reform of old-
age  social  security  with  measures  that  stimulate  active  ageing  and  longer  working  and 
linking  the  statutory  retirement  age  to  life  expectancy  would  help  to  achieve  this  goal. 
Second, the Belgian financial system still faces considerable challenges. Restructuring of 
the Belgian banks is on-going, and moreover given the high level of guarantees, the risks 
of  the  banking  and  public  sectors  are  interrelated. Third, the structural  problems  of the 
labour  market  persist,  and  more  could  be  done  to  tackle  them.  Increasing  the 
participation  in  lifelong  learning  and  pursuing  the  reforms  in  vocational  education  and 
training  are  crucial  to  improving  the  effectiveness  of  active  labour  market  policies, 
particularly for older workers and disadvantaged groups, such as people with a migrant 
background.  Fourth,  Belgium’s  competitiveness  is  deteriorating  and  companies  have  to 
contend with high labour costs (due to taxes and wage dynamics) and high energy prices, 
while productivity growth remains subdued. Apart from improved monitoring of energy 

  4

 
prices, no steps have been taken to adjust the wage-setting mechanism or to improve the 
design of the tax system. The potential for shifting taxes towards forms of taxation that 
have  a  less  distortive  effect  on  growth  has  not  been  exploited.  Finally,  not  enough 
progress has been made in fostering the efficient functioning of the internal market and 
further  developing  competition  in  the  retail  sector  and  network  industries  (energy, 
transport, telecom and postal services). 

2. 

ECONOMIC DEVELOPMENTS AND CHALLENGES 

1.1.  2.1. 

Recent economic developments and outlook  

Recent economic developments 

Following  the  strong  recovery  in  2010  and  the  first  half  of  2011,  as  a  result  of  world 
trade picking up, the Belgian economy slowed down considerably in the second part 
of  2011.  Quarterly  GDP  remained  flat  in  the  third  and  declined  by  0.1  %  in  the  fourth 
quarter, resulting in an average GDP growth of 2.0  % in 2011  

The main factors contributing to this slowdown were the general weakening of global 
activity and the ongoing sovereign debt crisis in the euro area, which have depressed 
consumer and business confidence since the summer of 2011. In addition, following the 
collapse of Dexia in October 2011 and the additional amount of guarantees (EUR 27.2 bn 
or 7.4 % of GDP) committed by the Belgian government under the temporary agreement 
concluded with France and Luxembourg in December 2011, there are renewed concerns 
about  the  health  of  the  banking  sector  and  the  impact  on  lending  (conditions)  to 
households and companies. 

As a result of the rise in prices of energy and unprocessed food, inflation rose to 3.5  % in 
2011 (from 2.3  % in 2010), which is higher than in the euro area on average (1.6  % and 
2.7  % in 2010 and 2011 respectively). 

Employment creation picked up in 2010 and 2011 (by 0.8  % and 1.3  % respectively). 
As a result, the unemployment rate fell from 8.3  % in 2010 to 7.2  % in 2011, one of the 
largest improvements in the EU. 

Outlook 

The factors that led to the contraction of economic activity in the second half of 2011 are 
still in place at the beginning of 2012 (subdued growth in world trade, continuation of the 
sovereign  debt  crisis  and  a  banking  sector  that  remains  fragile).  GDP  is  therefore 
projected to remain broadly flat in the first half of 2012. A very modest (export-led) 
recovery  is  expected  to  start  in  the  third  quarter,  and  is  likely  to  become  more 
pronounced in the fourth quarter of the year. 

The consumer confidence indicator peaked in May 2011, but has since fallen on the back 
of  increasing  concerns  about  the  labour  market  and  the  economic  situation  in  general. 
Hence, private consumption is likely to remain anaemic in 2012 with no real growth, 
following  its  0.7 %  rise  in  2011.  Private  investment  is  expected  to  slow  down 
considerably,  with  capacity  utilisation  having  fallen  back  below  its  long-term  average. 
Lower demand for mortgages in the first quarter of 2012 is expected to affect investment 
in  construction.  Finally,  the  consolidation  measures  included  in  the  2012  budget,  and 
complemented by additional measures in January and March, are likely to have a limited 
but  negative  impact  on  growth  this  year.  Exports  were  still  booming  during  the  first 
quarter of 2011, but they fell since then due to a slowdown of foreign markets. Exports 

  5

 
 
are likely to start to grow again in the course of 2012, but the unfavourable starting 
point will limit their increase in 2012 as a whole. 

Inflation  is  expected  to  slow  down  somewhat  in  2012  (from  3.5 %  to  2.9  %)  and  is 
likely to post a further decline in 2013 (to 1.8 %). 

The  outlook  on  the  labour  market  has  become  less  positive.  As  a  consequence,  the 
unemployment rate is expected to gradually rise again to about 8% in 2013. 

Procedural and governance issues 

The Belgian Government submitted the 2012 Stability Programme and the national 
reform programme (NRP) on 30 April 2012 to the European Commission. The two 
documents  outline  in  an  integrated  manner  the  fiscal  consolidation  efforts  on  the  one 
hand and key structural reforms and reforms underpinning macro-economic stabilisation 
on the other hand. The Stability Programme is in conformity with the Code of Conduct 
and  the  NRP  follows  well  the  guidance  provided  by  the  Commission.  Belgium  has 
ensured  close  coherence  between  the  two  programming  documents.  The  NRP  was 
approved by the federal government, while the regional NRPs annexed to the NRP were 
approved  at  an  earlier  stage  by  the  respective  regional  governments.  The  Belgian 
government held consultations with social partners on Europe 2020 matters prior to the 
NRP adoption. In order to ensure that national 2020 targets will be reached, consistency 
between  regional  and  national  targets  and  coordination  among  regional  actors  are 
essential. 

1.2.  2.2. 

Challenges 

Overall, the main policy challenges for Belgium have not changed compared to the 2011 
assessment  exercise.  The  state  of  its  public  finances  remains  the  most  important 
challenge.  Although  the  public  deficit  fell  gradually  again  in  the  years  after  the  crisis, 
public  debt  still  remains  high,  generating  risks  in  terms  of  sustainability  of  public 
finances, against the backdrop of a rapidly ageing population (age-related expenditure in 
Belgium  is  among  the  highest  in  the  EU)  and  the  high  level  of  expenditure  on  social 
transfers.  In  addition,  there  is  scope  for  improving  the  Belgian  fiscal  framework.  In 
the institutional part of the coalition agreement reached at the end of 2011, the regions 
and  communities  were  granted  more  responsibilities,  which  require  more  transparent 
rules on internal expenditure and effective medium-term fiscal planning to be extended 
to all levels of general government. 

Although the soundness of the financial sector improved in the course of 2010 and at the 
start  of  2011,  Belgian  banks  still  face  considerable  challenges.  Restructuring  of  the 
Belgian  banks  is  ongoing,  and  state  aid  granted  in  2008/2009  as  a  response  to  the 
financial  crisis  has  not  yet  been  fully  repaid.  Moreover,  given  the  high  levels  of 
guarantees, the risks of the banking and public sectors are interrelated. 

Thirdly, the Belgian labour market suffers from a persistently high share of long-term 
unemployed  in  overall  unemployment,  low  employment  participation  of  the  elderly 
and  of  people  with  a  migrant  background  throughout  the  entire  territory  as  well  as 
from  high  youth  unemployment  in  the  Walloon  Region,  the  Brussels  Capital  Region 
and certain urban areas in the Flemish Region.1 Overall, the latter region performs better 

1  While  youth  unemployment  stood  at  15.6  %  in  the  Flemish  Region  in  2010,  the  Walloon  Region  and 
Brussels-Capital  registered  levels  of  30  %  and  39.7  %.  This  is  not  to  say,  however,  that  youth 
unemployment  is  not  an  issue  in  the  Flemish  Region.  More  granular  analysis  by  the  Flemish  Regional 

  6

 
                                                 
 
than the two others in terms of both current absolute employment levels and employment 
rate growth over the last ten years. Nevertheless, the Flemish regional employment rate 
remains  below  par  when  compared  to  the  best-performing  regions  of  neighbouring 
countries.2  A  particularly  vulnerable  group  on  the  Belgian  labour  market  are  non-EU 
nationals.  Their  employment  rate  is  the  lowest  in  the  entire  EU  and  they  are  far  more 
likely to suffer from social exclusion than country nationals. Belgium would benefit from 
strengthening  incentives  to  work  by  decreasing  the  tax  wedge  and  the  (para-)fiscal 
pressure on labour income. Activation measures for those unemployed are comparatively 
ineffective  and  eligibility  requirements  for  unemployment  benefits  could  be  more 
actively enforced in order to provide more incentives for job search.   

A  fourth  main  challenge  concerns  Belgium’s  competitiveness.  The  current  account  is 
gradually deteriorating over time,3 due to the deterioration in the trade balance for goods, 
which is not entirely offset by the healthy performance of the services balance. Among 
the factors driving this deterioration, the loss of cost competitiveness certainly plays a 
role.  Given  the  existence  of  an  automatic  wage  indexation  system,  the  efforts  of  the 
government to limit real wage increases to no more than 0.3  % in the period 2011-2012 
may  not  have  prevented  nominal  wages  from  exceeding  those  in  the  neighbouring 
countries, as inflation could turn out to be higher than expected during wage bargaining 
and also higher than in the neighbouring countries. This is made all the more problematic 
by the fact that productivity growth is also weak, and that it is not only wages but also 
the costs of intermediary inputs (mainly energy) that are high. 

Despite having a liberalised energy market since 2007, retail energy prices do not seem 
to be competitive. Generally speaking, other goods and services are also more expensive 
in  Belgium  than  in  other  Member  States,  which  is  a  reflection  of  relatively  weak 
competitive pressures and some structural barriers, especially in the retail sector and 
network industries such as energy, transport, postal services and telecom. These higher 
prices  put  upward  pressure  on  (core)  inflation,  which  affects  wages  through  the 
automatic indexation mechanism and raises the prices of industrial goods as a result. 

Belgium’s  competitiveness  could  also  be  supported  by  non-price  factors,  such  as  the 
structural  features  of  trade  (e.g.  product  specialisation  and  geographical  orientation  of 
exports) and micro-based aspects of economic performance (such as brand, quality and 
after-sales-service) which are not fully covered by price-based measures. While Belgium 
has a high quality research system, the R&D intensity of the private sector has stagnated 
in recent years. A key challenge for Belgium is how to speed up the transition towards 
a more knowledge-intensive economy by fully exploiting the strengths of its research 
system.  Moreover,  despite  the  availability  of  highly  qualified  human  capital,  there 
appears  to  be  a  mismatch  between  labour  demand  and  supply  in  some  sectors. 
Shortages  of  skilled  professionals,  particularly  in  sciences  and  engineering,  could 
become a major barrier in terms of further improving the innovation performance of the 
Belgian economy. 

Employment  Service  highlights  youth  unemployment  levels  of  between  18  %  and  24  %  in  specific 
(mainly) urban areas.  
2  While  the  employment  rate  (20-64)  in  2010  was  62.2   %  in  the  Walloon  Region  and  59.2   %  in  the 
Brussels  Capital  Region,  it  stood  at  72.1   %  in  the  Flemish  Region,  which  is  below  the  national 
employment  rate  in  the  Netherlands  (76.8  %)  and  Germany  (74.9  %)  but  higher  than  the  one  in  France 
(69.1 %).  
3 While between 1995 and 2000 the current account generated surpluses of more than 5  % of GDP, this 
surplus gradually eroded and fell below 2  % of GDP in 2010 (Balance of Payments definition). 

  7

 
                                                                                                                                                 
Regarding climate and energy, Belgium is on track to meet its target to increase the share 
of renewable energy in energy consumption, but progress towards reaching the 15 % 
reduction  target  for  greenhouse  gases  in  the  non-ETS4  sectors  is  likely  to  be 
negligible. Although emissions were down by 1  % until 2010 (compared to 2005 levels) 
they  are  expected  to  increase  by  0.3    %  by  2020  (compared  to  2005)  according  to 
Belgium’s latest projections, leading to a shortfall of the target by 15.3 percentage points. 

Box 1: Summary of the results of the in-depth review under the macroeconomic imbalances 
procedure 

The  recent  deterioration  in  Belgium's  current  account  balance,  mainly  due  to  the 
deterioration of the goods balance – in contrast to improvements in the services balance, 
went  hand  in  hand  with  important  losses  in  market  share  and  declining  cost 
competitiveness. While it remains unclear whether this development is due to a sustained 
transition  towards  a  more  service-oriented  economy,  the  fact  that  Belgian  exports  lost 
ground compared to other euro-area countries points to country-specific negative factors. 
Whereas  the  analysis  acknowledges  the  high  level  of  productivity  in  the  country,  it 
highlights  that  both  cost  and  non-cost  factors  have  hampered  Belgian  competitiveness. 
Cost competitiveness has been suffering from both developments of labour costs and the 
price  of  intermediate  inputs,  mainly  energy.  Labour  costs  have  indeed  increased  faster 
than in its main trading partners (DE, FR and NL). In addition, the technological content 
(many  low-to-medium  technology  goods)  of  Belgian  export  products  makes  Belgium 
more  sensitive  to  competition  from  low-wage  countries,  while  the  geographical 
specialisation of exports (mainly euro area countries) implies a slower market growth.  

On the internal side, the level of the non-consolidated private sector debt of non-financial 
corporations is high. However, specific factors, such as the high credit provision among 
companies of the same group, which is partly related to the previously advantageous tax 
regime  of  the  coordination  centres,  contribute  to  lessen  the  concerns.  Conversely,  the 
households' indebtedness is relatively low and mostly related to mortgage debt, while the 
households' wealth as measured by their net financial assets is among the highest in the 
euro area.  

The  trend  reversal  of  the  public  debt  is  a  matter  of  concern.  Given  the  high  and 
increasing public debt level, and notwithstanding that the economy as a whole is in a net 
lending  position,  the  Belgian  public  sector  remains  vulnerable  to  market  pressure.  The 
strong interplay between the Belgian sovereign and the banking sector poses a risk. The 
high levels of state guarantees granted to the financial sector and possible needs for bank 
recapitalisation  could  have  an  important  impact  on  public  debt.  On  the  other  hand, 
Belgian  banks  could  be  negatively  impacted  by  their  large  holdings  of  domestic 
government bonds, which expose them to a significant sovereign debt. 

The policy response to strengthen cost-competiveness could include measures to improve 
the  functioning  of  the  system  of  wage  formation  and  to  enhance  competition  in  the 
network  industries,  particularly  in  energy  markets.  Possible  measures  to  improve  non-
cost competitiveness include the promotion of investment in R&D and in the information 
and  telecom  area,  ensuring  efficient  goods  and  services  markets  by  strengthening 

4 In Belgium only 37.9  % of emissions come from sectors included in the EU Emission Trading Scheme 
(ETS). Of the more important non-ETS sectors road transport (21.5  %) and energy use (38.9  %) are the 
largest sources of GHG emissions in the country. 

  8

 
 
                                                 
competition  and  revising  regulatory  barriers,  enhancing  the  adjustment  capacity  of  the 
labour  market  in  order  to  improve  labour  reallocation  and  increase  labour  force 
utilisation. Finally, decisive implementation of measures to consolidate public finances is 
needed to put public debt on a steadily decreasing path again and to mitigate pressure in 
the sovereign debt market. This would also alleviate the risk for banks with large holding 
of domestic government bonds. 

3. 

ASSESSMENT OF THE POLICY AGENDA  

1.3.  3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The general government deficit jumped from 1 % of GDP in 2008 to 5.6 % in 2009 as a 
result of the financial crisis and the recession. On 2 December 2009, the Council decided 
that  an  excessive  deficit  existed  in  Belgium  and  recommended  to  put  an  end  to  this 
situation by 2012. In 2010, the deficit dropped to 3.8 % of GDP thanks essentially to the 
recovery  and  to  the  consolidation  measures  foreseen  in  the  budget  but  the  decrease 
almost  stopped  in  2011  as  the  deficit  only  declined  to  3.7  %  of  GDP.  The  budgetary 
strategy outlined in the stability programme aims at bringing the deficit below 3 % 
of GDP in 2012 (2.8 %) and to achieve a balanced budget by 2015. To that effect, the 
deficit of Entity I (Federal government and social security) would be reduced from 2.4 % 
of  GDP  in  2012  to  0.1  %  in  2015,  while  Entity  II  (Regions,  Communities  and  local 
authorities)  would  move  from  a  deficit  of  0.4  %  of  GDP  to  a  surplus  of  0.1  %.  The 
medium-term  budgetary  objective  (MTO),  unchanged  with  respect  to  the  previous 
updates of the programme, remains a structural surplus of 0.5 % of GDP and adequately 
reflects  the  requirements  of  the  Stability  and  Growth  Pact.  The  reduction  in  the  deficit 
would allow putting the public debt ratio on a clearly declining path from 2013 onwards 
(see annex table IV). 

The  2012  stability  programme  of  Belgium  is  based  on  a  macroeconomic  scenario 
where, after stagnating in 2012, activity recovers somewhat in 2013 (+1.3 %) and more 
frankly in 2014 and 2015, though GDP growth is expected to remain below 2 % (+1.7 % 
and  1.8  %,  respectively).  For  2012  and  2013,  these  projections  are  very  close  to  the 
spring 2012 forecast of the Commission services, which projects GDP growth at 0 % and 
+1.2  %,  respectively.  For  2014  and  2015,  however,  the  growth  projections  in  the 
programme are substantially higher than the Commission services' estimates of potential 
growth (1.1 % a year on average). 

In  order  to  meet  the  deadline  set  by  the  Council  and  to  reduce  the  deficit  to  2.8  %  of 
GDP  in  2012,  the  newly  constituted  Belgian  government  included  in  the  2012 
budget,  drafted  in  December  2011,  a  series  of  consolidation  measures  amounting, 
according  to  the  budget  and  the  stability  programme,  to  about  3  %  of  GDP.  This  also 
included  an  additional  spending  freeze  of  about  0.35  %  of  GDP.  The  Commission 
services concluded that, based on the macroeconomic scenario prevailing at that moment 
(a  growth  projection  at  0.9  %  according  to  the  Commission  services'  2011  autumn 
forecast), on the consolidation measures in the budget and on the additional freeze, the 
deficit would situate at 2.9 % of GDP in 2012. 

Since  then,  growth  forecast  has  been  substantially  revised  downwards  to  0  % 
(Commission services spring 2012 forecast). In March, the Belgian authorities carried 
out  a  budgetary  monitoring  exercise,  which  resulted  in  the  adoption  of  new 
measures  amounting  to  about  0.3  %  of  GDP.  Taking  also  into  account  some 

  9

 
 
downward  revisions  in  spending,  the  Commission  services  estimated  that  the  deficit 
would be reduced ceteris paribus by about 0.4 percentage point of GDP. 

Box 2: Main budgetary measures 

Revenues 

Expenditure 

2012 

•  Reform  of  the  system  of  "notional 

•  Suppression  of  the  subsidy  for  clean 

• 

interests": 0.4 % of GDP 
Increase  in  the  taxation  of  dividends 
and interests: 0.2 % of GDP 

cars: -0.1 % of GDP 

•  Reduction in transfers to railways: -0.1 

% of GDP 

•  Fighting tax evasion:  0.2 % of GDP 
•  Abolition  of  bank  secrecy:  0.1  %  of 

•  Slower increase and additional savings 
in healthcare spending: -0.6 % of GDP 

• 

GDP 
in  VAT  on  pay-TV  and 
Increase 
introduction  of  VAT  on  services  of 
notaries and bailiffs: 0.06 % of GDP 
•  Taxation  on  houses  freely  put  at  the 
disposal of company bosses: 0.05 % of 
GDP 
Increase  in  excise  duties  on  tobacco 
products: 0.05 % of GDP 

• 

•  Reform of the taxation on capital gains 
inside companies: 0.05 % of GDP 
•  Non-tax revenues : 0.2 % of GDP 

Note: The budgetary impact in the table is the impact reported in the programme, i.e. by 
the national authorities. A positive sign implies that revenue/expenditure increases as a 
consequence of this measure. The degree of detail reflects the type of information made 
available  in  the  stability  or  convergence  programme  and,  where  available,  of  a 
multiannual budget. 

The government layers  of Entity II (regions, communities and local authorities) have 
also  taken  measures  in  order  to  reduce  their  deficit,  which  are  estimated  in  the 
programme  at  0.3  %  of  GDP  in  2011.  These  measures  are  supposed  to  allow  them  to 
come back to balance in 2013 and to record a small surplus (0.1 % of GDP) in 2014 and 
2015.    

In their spring 2012 forecast, the Commission services project the deficit at 3 % of GDP 
in 2012, based on a zero growth assumption and taking into account the disappointing tax 
revenues  recorded  in  the  first  months  of  the  year.  Under  an  unchanged  policy 
assumption,  they  also  forecast  that  the  deficit  will  rise  to  about  3.3  %  in  2013 as the 
favourable  effects  of  the  recovery  will  be  offset  by  the  autonomous  rising  trend  in 
healthcare and pension spending as well as the fading away of the impact of the one-off 
measures foreseen for 2012, which are estimated at about ½ % of GDP. This implies that, 
in the view of the Commission services, Belgium will probably be able to meet the 2012 
deadline  for  the  correction  of  its  excessive  deficit  but  that  additional  consolidation 
measures will be necessary, especially in 2013, in order to make this correction durable.  

  10

 
 
 
 
 
The  consolidation  path  described  in  the  programme  implies  a  steep  increase  in 
revenues (expressed in percentage of GDP) in 2012 and a slower one afterwards: all 
in all, revenues are planned to rise by 2.6 percentage points of GDP from 2011 to 2015, 
with more than two-thirds of this increase (1.9 percentage point of GDP) taking place in 
2012. In parallel, after increasing by 0.9 percentage point of GDP in 2012, expenditure is 
projected  to  decrease  by  2  percentage  points  of  GDP  from  2012  to  2015.  In  terms  of 
nominal  balance,  the  consolidation  effort  is  slightly  back-loaded,  with  the  planned 
reduction in the headline deficit amounting to 0.9 percentage point of GDP in 2012, 0.7 
in  2013,  1.0  in  2014  and  1.1  in  2015.  The  measures  that  will  allow  carrying  out  this 
consolidation have not yet been specified for the years after 2012.      

The  objectives  specified  in  the  programme  are  close  to  those  presented  in  the 
previous  programme,  although  the  macroeconomic  environment  is  substantially  less 
favourable (in particular for 2012, with GDP growth revised from 2.3 % to 0.1 %), which 
implies that the effort required will be substantially more important. For 2001, the deficit 
objective, which was 3.6 % of GDP) has broadly been met (3.7 %). For 2012, the 2.8 % 
objective remains unchanged. For 2013 and 2014, the new objectives (2.15 % and 1.1 % 
of GDP, respectively) are slightly less ambitious than those in the previous programme 
(1.8 % and 0.8 %, respectively). For 2015, the objective is now a balanced budget instead 
of a 0.2 % of GDP surplus.  

Box 3. Excessive deficit procedure for Belgium 

On 2 December 2009, the Council decided that an excessive deficit existed in Belgium. 
The Council recommended that the Belgian authorities should put an end to the present 
excessive  deficit  situation  by  2012.  The  Council  also  recommended  that  the  deficit  be 
brought  below  3  %  of  GDP  in  a  credible  and  sustainable  manner  in  a  medium-term 
framework. Specifically,the Belgian authorities were recommended to  

a)  implement  the  deficit-reducing  measures  in  2010  as  planned  in  the  draft  budget  for 
2010 and strengthen the plannend fiscal effor tin 2011 and 2012, and  

b)  ensure an average annual fiscal effort of ¾ % of GDP over the period 2010-2012.   

An  overview  of  the  current  state  of  excessive  deficit  procedures  is  available  on: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/index_en.htm  

In  its  recommendation  addressed  to  Belgium,  the  Council  recommended  that  the 
improvement in the structural deficit amount to ¾ % of GDP on average over the period 
(see box 3). The structural deficit 5 only declined by 0.5 percentage point of GDP in 2010 
and  even  rose  by  0.2  in  2011.  However,  for  the  period  2012-2015,  the  consolidation 
path described in the programme is broadly in line with the recommendation. For 
2012, the improvement should amount to about 1.1 percentage point of GDP according 
to  the  programme  and  0.7  according  to  the  Commission  services.  For  the  period  after 
2012, the programme envisages an improvement in the structural deficit amounting to 0.9 
percentage  point  of  GDP  in  2013,  0.7  in  2014  and  0.8  in  2015,  which  would  imply  an 

5  The  structural  balance  being  defined  as  the  cyclically  adjusted  balance  net  of  one-off  and  temporary 
measures,  recalculated  by  the  Commission  services  on  the  basis  of  the  information  provided  in  the 
programme, using the commonly agreed methodology. 

  11

 
                                                 
annual  average  improvement  by  about  0.9  percentage  point  of  GDP  over  the  period 
2012-2015.  For  2013,  the  Commission  services  only  foresee  an  improvement  by  0.2 
percentage point of GDP but this low figure is due to the "unchanged policy" assumption 
on which their forecast is based for that year.   

According  to  the  information  in  the  programme,  the  growth  rate  of  government 
expenditure, net of discretionary revenue measures, over 2013 will not exceed a rate 
which is lower than the reference medium-term rate of potential GDP growth (1.4 
%)  and  which  ensures  an  annual  structural  adjustment  towards  the  MTO  by  0.5  %  of 
GDP  (0.4  %).  According  to  Commission  services'  forecast,  the  growth  rate  of 
government expenditure, net of discretionary revenue measures, over 2013 will exceed a 
rate  which  is  lower  than  the  reference  medium-term  rate  of  potential  GDP  growth  (1.4 
%)  and  which  ensures  an  annual  structural  adjustment  towards  the  MTO  by  0.5  %  of 
GDP (0.4 %). For 2014 and 2015 the real growth of government expenditure is planned 
to be lower than the lower reference rate. 

As  far  as  the  public  debt  is  concerned,  the  programme  projects  the  debt-to- 
GDP ratio to progressively decline from a maximum of 99.4 % this year to 92.3 % 
in  2015.  By  contrast,  due  to  the  increase  in  the  deficit  forecast  for  2013  and  to  the 
additional borrowing needed to finance the Belgian contribution to the EFSF, the ESM 
and the bilateral loans to Greece, the Commission services project the debt ratio (under 
the same "no-policy change" assumption) to increase slightly above 100 % in 2012 and 
to keep rising somewhat in 2013.  

Belgium will be in transition period and plans would ensure sufficient progress towards 
compliance  with  the  debt  criterion.  According  to  the  Commission  services'  forecast, 
progress towards compliance with the debt criterion will indeed be sufficient. 

Overall, the recommendation addressed to Belgium to eliminate its excessive deficit for 
2012  is  still  achievable.  However,  due  to  the  lack  of  margin  between  the  current 
deficit estimates and the 3 % of GDP threshold, it cannot be discarded that further 
measures  need  to  be implemented for this year and permanent monitoring is thus 
warranted. Moreover, additional consolidation measures will be necessary, in particular 
in 2013, to ensure that the excessive deficit is eliminated in a sustainable way. 

Long-term sustainability 

The projected long-term change in age-related expenditure is clearly above the EU 
average.6 The initial relatively favourable budgetary position compounds the long-term 
costs.  Based  on  simulations  prepared  by  the  Commission  services,  under  a  no-policy 
change  assumption,  debt  would  increase  to  105.8  %  of  GDP  by  2020.  Considerable 
additional  fiscal  consolidation  beyond  the  forecast  horizon  would  be  needed  to  make 
progress  towards  the  reference  value  for  government  debt  beyond  the  short-term. 
However, the full implementation of the programme would be enough to put debt on a 
downward path by 2020 though it would still be above the 60 % of GDP reference value. 
Belgium has little scope to increase its already high tax burden; thus focus should be put 
on  decreasing  public  spending  in  order  to  diminish  its  sustainability  gap.  Ensuring 

6 It is especially the case for pensions (the projected expenditure growth is of 5.6 p.p. of GDP, compared to 
the  EU27  average  of  1.5  p.p.),  but  also  for  health  and  long-term  care  expenditure  (3.1  p.p.  vs  EU27 
average of 2.6 p.p.). The impact of the most recent reform is not included in these figures. 

  12

 
                                                 
sufficient  primary  surpluses  over  the  medium-term  and  further  reforming  the  Belgian 
social  security  system,  so  as  to  curb  the  projected  substantial  increase  in  age-related 
expenditure, would improve the sustainability of public finances. 

Fiscal frameworks 

Given  Belgium’s  decentralised  government  structure,  in  which  the  communities  and 
regions  have  a  substantial  measure  of  autonomy  over  their  budgets,  coordination  of 
fiscal policy between the different levels is crucial, and automatic procedures need 
to be put in place. During the negotiations to form a new federal government following 
the  elections  of  13  June  2010,  much  of  the  debate  was  focused  on  the  revision  of  the 
federal law that governs the financing of regions and communities (Special Finance Act). 
75  %  of  the  revenues  of  the  regions  and  the  communities,  which  manage  about  one 
fourth of general government spending, come from grants from the federal state. These 
grants  are  increased  automatically  every  year  to  take  account  of  inflation  and  GDP 
growth.  Following  the  agreement  of  December  2011  on  institutional  reform,  some 
changes will be made to the transfer system, so that the regions and communities obtain a 
bigger share of responsibilities and greater tax autonomy, and the transfer system will be 
revised.  Nevertheless,  although  the  revised  system  is  an  improvement  compared  to  the 
previous  one,  the  design  of  the  system  has  not  fundamentally  changed,  and  it  is  not 
sufficient  as  an  appropriate  means  of  preventing spending slippages across government 
levels.  In  addition  to  a  rules-based,  multi-annual  framework  for  general  government, 
particularly with regard to expenditure, it would be helpful to have some kind of internal 
stability programme to secure and enforce more robust, automatic commitments from the 
regions and communities, as well as from the local level, in order to meet their allocated 
deficit targets. 

Tax systems 

The tax-to-GDP ratio in Belgium is among the highest in the EU. The Belgian tax system 
is characterised by a relatively high share of direct taxes, reflecting a broad reliance on 
personal  and  corporate  income  taxes.  By  contrast,  the  share  of  indirect  taxes  and 
environmental  taxes  is  among  the  lowest  in  the  EU.  Low  average  growth  compared  to 
neighbouring countries combined with increasing wage costs call for a structural reform 
of the tax system, which currently relies on growth-distorting taxation, particularly 
labour taxes.  

Box 4: Overview of changes in the tax system in Belgium 

•  Increase  in  the  tax  allowance  for  low  and  middle–income  earners  and  a  lowering  of  social 
security  contributions  for  the  first  three  employees  hired  by  medium-sized  enterprises  from 
2013 onwards. 

•  Cut  in  personal  income  tax  expenditures,  particularly  deductions  for  energy-efficient 

investments. 

•  Plan to abolish the deductibility of mortgage payments, which would be replaced by regional 
tax  measures  from  2014  onwards.  As  the  regions  have  not  yet  decided  which  measures  to 
take, the impact of abolishing this tax expenditure is still unclear. 

•  Increase  in  capital  taxation  by  raising  the  withholding  tax  on  interest  and  dividends,  by 
introducing  a  solidarity  levy  on  movable  income  and  by  introducing  a  stock  exchange 
transaction tax on short-term investments. 

•  Increase in corporate taxes, as the notional interest deduction is capped at 3  % of equity until 

2014. 

  13

 
•  Reduction in the subsidies granted through tax deductions for company cars.  

•  Reform  of  the  car  registration  tax  at  regional  level.    The  reformed  car  tax  in  the  Flemish 
Region is based entirely on the CO2 emissions and on the air quality standard to which the car 
conforms. As of 1 January 2012, the Walloon Region strengthened its CO2-based Ecobonus/-
malus scheme for registering a car which is applied on top of the federal car taxation scheme. 

•  The  Flemish  Region  made  minor  changes  to  the  landfill  and  incineration  tax,  and  there  are 
plans to split the wastewater tax into a regulatory component and a financing component. 

In general, the tax measures included in the budgetary agreement (see box 4) tend to 
be growth-friendly, as it is consumption taxes rather than labour taxes that are increased 
and  there  are  plans  to  improve  the  efficiency  of  tax  collection.  The  VAT  base  was 
broadened  by  including  notary  services  and  by  abolishing  the  reduced  rate  for  digital 
television  services.  In  addition,  excise  duties  on  tobacco  have  been  increased.  The 
government  has  also  decided  to  step  up  the  fight  against  tax  fraud  and  social  fraud  by 
extending the powers of the fraud authorities and by strengthening cooperation between 
them. However, the new measures are unlikely to alleviate the tax burden on labour or to 
reduce  the  competitive  disadvantage  in  wage  costs.  The  potential  to  increase  VAT 
revenues  further  and  to  base  property  taxation  on  current  market  value  remains  largely 
unused.  With  respect  to  increasing  consumption  taxes,  it  should  be  noted  that  the 
standard VAT rate in Belgium is comparable to the rate in neighbouring countries, and 
that further increases might hamper domestic consumption and exacerbate the regressive 
nature of the Belgian tax system, resulting in undesirable social consequences. It would 
be  preferable,  therefore,  to  increase  VAT  efficiency  by  eliminating  reduced  rates  and 
exemptions, rather than to increase the standard rate. 

In addition, there is still considerable potential for greening the taxation system. Fuels 
are  not  taxed  consistently  according  to  their  energy  content  and  although  the  amended 
company  car  taxation  system  reduces  tax  revenue  losses,  it  provides  no  incentive  for 
drivers to cut back on the private use of their car. A carbon tax for emissions from both 
the  housing  and  transport  sectors  would  support  the  move  towards  green  growth  and  a 
less emission-intensive economy, as well as helping to tackle the congestion problem. In 
addition,  a  rise  in  the  relatively  low  fuel  taxes and the  reduction of tax  exemptions for 
company  cars  and  commuting  would  be  valuable  in  terms  of  halting  the  increase  in 
emissions from the road transport sector, and eventually reducing such emissions, in light 
of the lack of progress on this target. 

1.4.  3.2. 

Financial sector 

Financial stability 

The financial situation of Belgian banks remains fragile. The average solvency ratio 
increased  in  2010,  as  banks  returned  to  profitability,  but  deteriorated  again  in  2011, 
mainly due to impairments on investments abroad. The ratio of non-performing loans to 
total gross loans has remained stable since 2009 (at 2.9  %), but has not yet fallen back to 
its lower pre-crisis levels (1.2  % in 2007). Moreover, although the exposure of Belgian 
banks  has  been  significantly  reduced  since  2008,  they  remain  vulnerable  due  to  high 
exposure  to  euro  area  countries  directly  affected  by  the  sovereign  debt  crisis  and  to 
Central  and  Eastern  European  countries.  According  to  the  results  of  the  July  2011 
European Banking Authority's stress test, no Belgian institution was below the required 5 
% core Tier 1 capital (banks were above 10 % core Tier 1). Following the October 2011 
European  Council  conclusions,  in  the  context  of  the  temporary  bank  recapitalisation 
exercise  coordinated  by  the  European  Banking  Authority,  only  Dexia  fell  short  of 

  14

 
 
complying  with  a  higher  minimum  core  Tier  1  capital  ratio  of  9  %  of  risk-weighted 
assets after accounting for sovereign debt holdings at market prices.  

The  Belgian  authorities  have  played  an  active  part  in  the  process  of  restructuring 
Dexia  after  the  Dexia  holding  collapsed  in  October  2011  despite  the  improved 
supervisory  framework.  In  particular,  they  bought  the  Belgian  subsidiary  (renamed 
‘Belfius’ in March 2012) of the group, in addition to providing state guarantees7 to the 
Dexia holding. The streamlining of the group is not complete, and further restructuring is 
required.  KBC  has  been  following  its  restructuring  plan,  involving  several  divestments 
and  reductions  of  the  balance  sheet.  The  bank  repaid  EUR  500  million  (as  well  as  an 
interest  fee  of  EUR  75  million)  to  the  federal  government  at  the  beginning  of  January 
2012, and a sum of EUR 6.5 billion has to be repaid by the end of 2013.  

The  coalition  agreement  of  December  2011  introduced  some  measures  that  were 
intended  to  lead  to  stricter  supervision  on  banks,  better  management  and  stronger 
capital buffers. In order to further improve bank supervision (following the introduction 
of  the  ‘Twin  Peaks  model’8  in  April  2011),  the  new  federal  government  decided  to 
strengthen  the  powers  of  Parliament  to  monitor  the  Financial  Services  and  Markets 
Authority  (FSMA).  The  FSMA  would  be  transformed  into  a  stronger  and  independent 
regulator serving the interests of the consumers of financial products. Bank management 
benefited  from  the  introduction  of  a  ‘bank  will’,  which  describes  the  procedures  to  be 
followed in the event of a crisis. It has also been decided that banks which have received 
state aid may not pay out any bonuses until the state aid has been repaid. In line with the 
2011 recommendation, the government also agreed that the restructuring of banks should 
be  continued  and  finalised  in  order  to  ensure  better  risk  management  and  greater 
solvency of the banks. 

Funding of the economy 
Despite tighter funding (reflected in the increased demand for Eurosystem loans9), 
the overall loans to the non-Monetary Financial Institutions (non-MFIs) continued 
to  rise,  albeit  at  lower  rates  than  before  the  crisis.  While  lending  to  the  household 
sector  remained  broadly  stable,  loans  to  the  corporate  sector  slowed  down,  although 
Belgian small and medium enterprises still have better access to public financial support 
than  do  similar  firms  in  other  EU  countries.10  In  line  with  the  2012  AGS  priority  to 
restore lending to the real economy, a number of initiatives have been taken to improve 
access  to  funding  for  small  and  medium  enterprises,  such  as  the  establishment  of 
‘Concileo’  as  a  permanent  mediation  platform  in  the  Walloon  Region  and  the 
appointment  of  a  ‘credit  mediator’  (at  central  and  regional  levels)  to  assist  companies 
that are experiencing financial difficulties or to help enterprises obtain bank funding. The 

7  This  initial  agreement  on  guarantees  of  EUR  90  bn,  of  which  Belgium  has a share of 60.5  % or EUR 
54.4 bn (about 15  % of GDP), was modified in December to half of the amount, i.e. EUR 45 bn, of which 
EUR 27.2 bn (7.4  % of GDP) would be attributed to Belgium. 
8  The  central  bank  takes  charge  of  supervising  individual  financial  intermediaries  and  the  system  as  a 
whole,  while  the  FSMA  (Financial  Services  and  Market  Authority)  is  responsible  for  supervising  the 
smooth operation of the markets, the conformity of financial products and services, and proper consumer 
information and protection. 
9 Belgian banks increased their borrowing from the ECB to EUR 45 billion (4.9  % of liabilities) by end-
November 2011. 
10  As  regards  access  to  private  capital,  the  share  of  unsuccessful  loan  applications  is  much  lower  in 
Belgium  than  in  other  EU  countries  (only  5   %,  as  compared  to  the  EU  average  of  23   %).  The  Belgian 
share of early-stage venture capital investments is almost three times the EU average. 

  15

 
                                                 
federal  government  launched  a  second  ‘Starters  Fund’,  providing  a  loan  of  EUR  300 
million of additional resources to enable the Participation Fund to finance starters. 

1.5.  3.3. 

Labour market, education and social policy 

The sluggish performance of the Belgian labour market is the result of the interplay of a 
number  of  features  highlighted  in  the  2011  Council  recommendations,  such  as  a  low 
effective retirement age due to relatively lenient eligibility conditions for early retirement 
(age and career length) and widespread early exit systems (CSR 2), the perverse effects 
of the current wage-setting mechanisms, including the wage indexation system (CSR 4), 
a high tax and social security burden on wages (CSR 5) and disincentives to taking up 
work  as  a  result  of  an  insufficiently  regressive  unemployment  benefit  system  (CSR  5), 
together  with  fairly  ineffectual  active  labour  market  policies  (CSR  5).  Progress  in 
tackling these various issues has been patchy. Belgium initiated a reform of its social 
security systems in respect of old-age and unemployment benefits. However, no headway 
has been made in shifting the tax burden away from labour or in reforming the existing 
wage bargaining system (see section 4.4). 

More specifically, in response to the 2011 recommendation, the new federal government 
reached agreement in December 2011 on a long-awaited reform of the Belgian old-age 
social security system designed to boost labour market participation by older workers11 
and to curb age-related expenditure (as ageing costs in Belgium are significantly higher 
than  in  the  EU  on  average).  The  main  aim  of the  reform is to extend  working lives  by 
tightening the eligibility requirements for early retirement (age, minimum career) and by 
gradually rolling back early exit or ‘preretirement’ systems. In addition, both the public 
and  private  pension  schemes  will  be  made  less  generous  by  respectively  extending  the 
basis  for  calculation  from  the  last  5  years  of  working  life  to  the  last  10  years,  and  by 
reducing pension rights accrued during periods of inactivity. Lastly, a number of special 
retirement schemes are being phased out. The reform is an important step in the efforts 
that are being made to curb age-related expenditure and promote active ageing. While the 
transition  periods  for  phasing  in  the  new  rules  are  relatively  short,  the  impact  of  the 
measures  taken  will  depend  crucially  on  the  consistency  of  their  implementation,  the 
monitoring arrangements that are put in place and the extent to which potential abuse of 
possible loopholes (for instance, within  the  sickness  and disability schemes)  is tackled. 
Additional measures that control expenditure increases in the health system and that link 
the statutory retirement age with increases in life expectancy would contribute further to 
the long-term sustainability of public finances. 

In addition to the measures to tighten the eligibility requirements for early retirement and 
to roll back early exit systems, the government agreed on a number of new initiatives to 
support  active  ageing:  (i)  as  of  April  2012,  social  security  charges  on  the  employers' 
contributions to preretirement schemes have increased in order to discourage the abuse of 
early  exit  systems  during  restructuring;  (ii)  unless  the  social  partners  come  up  with  a 
collective bargaining agreement serving the same purpose, as of July 2012, employers of 
medium-sized and large companies would be required by law to develop an annual active 
ageing  strategy,  outlining  the  measures  they  intend  to  take  in  order  to  maintain  and/or 
increase  employment  opportunities  for  workers  over  the  age  of  45;  (iii)  in  the  case  of 

11 According to Eurostat the effective retirement age in Belgium stood at 61.6 years in Belgium in 2007, 
while  the  OECD  —  using  a  5-year  average  —  reports  a  figure  of  59  years  in  2009.  Despite  differences 
depending on the source and type of data, the gap with the statutory age of 65 years is high. 

  16

 
                                                 
collective  redundancies,  employers  would  be  required  to  spread  the  dismissals 
proportionally over the various age categories employed in the company. 

In response to the 2011 recommendation, Belgium has made good progress in reforming 
its  unemployment  benefit  system  but  efforts  to  lower  the  tax  burden  on  wages  are 
limited. A new tax credit for those on the lowest wages has been introduced but given 
the small amounts involved (max EUR 120/year) it is insufficient to remedy the serious 
unemployment traps at the bottom of the pay scale. Efforts to reduce the tax wedge and 
the  (para-)fiscal  pressure  on  labour  income,  which  rank  among  the  highest  in  the  EU, 
would  strengthen  incentives  to  work.  To  preserve  fiscal  sustainability,  reductions  in 
labour taxes could be offset by increases in more growth-friendly taxes, such as recurrent 
taxes on immovable property, and environmental and consumption taxes.   

On the other hand, the 2011 coalition agreement contains a fairly detailed proposal for a 
reform  of  the  unemployment  system,  which  would  increase  the  rate  of  reduction  of 
unemployment  benefits  over  time,  without  having  them  fade  out  entirely  (see  Box  5). 
Like the reform of the old-age social security system, the intended measures with regard 
to  the  unemployment  benefit  scheme  are  in  line  with  the  thrust  of  the  Council 
recommendations,  in  the  sense  that  they  provide  stronger  incentives  to  take  up  work. 
Additionally,  more  active  enforcement  of  compliance  with  eligibility  requirements  of 
unemployment  benefits  would  provide  more  incentives  for  job  search.  Apart  from  the 
increased  degressivity  of  the  unemployment  benefits  adopted  by  the  government, 
incentives  to  look  for  jobs  could  be  further  enhanced  by  ensuring  that  unemployment 
assistance benefits are designed in such a way to make work pay for all socio-economic 
groups, and accompanied by appropriate activation policies. 

Box 5 — Reform of the unemployment benefit system 

The  reform  consists  of  two  major  parts  dealing  with  (1)  the  tide-over  allowance  ('allocation 
d'attente')  granted  to  young  unemployed  who  have  not  yet  contributed  or  have  not  contributed 
sufficiently  to  the  unemployment  social  security  system  and  (2)  the  regular  unemployment 
benefit scheme. 

(1) The legislative proposals with regard to the reform of the tide-over allowance were adopted 
by  Parliament  at  the  end  of  December  2011  and  entered  into  force  on  1  January  2012.  They 
tighten the eligibility conditions for this particular type of unemployment benefit in several ways: 
(i) the ‘waiting period’ before an allowance is granted will be extended to 12 months (instead of 
9)  for  all  new  applicants  and  transformed  into  a  ‘vocational  development  phase’  during  which 
significant  steps  should  be  taken  to  find  employment,  (ii)  a  periodical  evaluation  of  the  efforts 
will  be  introduced  and  will  only  be  allowed  after  a  positive  evaluation  the  extension  of  the 
unemployment benefit scheme has been received, and (iii) as a rule, the duration of the benefit 
period will be limited to a maximum of 3 years, although there will be some exceptions. 

(2)  The  legislative  proposals  for  the  reform  of  the  regular  unemployment  allowance  are 
currently  being  drafted.  Under  the  terms  of  the  coalition  agreement,  the  new  system  would 
gradually  reduce  the  unemployment  allowance  by  more  than  in  the  current  system  and  would 
apply to all beneficiaries, regardless of the composition of their household. After a given period 
(depending on the number of years in employment, but not more than four years) the beneficiary 
would revert to a flat-rate payment. This reform is due to be adopted by Parliament in the coming 
months.  

  17

 
Finally,  Belgium  spends  a  comparatively  high  average  amount  per  person  on  active 
labour  market  policies12,  but  the  effectiveness  of  these  policies  is  hampered  by  a 
number  of  factors,  such  as  limited  coordination  of  institutional  actors  contributing  to 
low  interregional  labour  mobility  and  fragmented  policy  implementation    (particularly 
the  different  levels  at  which  activation,  benefits  and  sanctions  are  managed,  leading  to 
long time-lags in keeping track of job seekers and fragmented implementation of policy), 
insufficient follow-up of older job seekers, significant unemployment and inactivity traps 
and distorted incentives to continue working past the age of 55. The latter two issues are 
dealt  with  in  part  by  the  initiation  of  reforms  of  the  unemployment  and  old-age  social 
security  systems  described  above.  However,  despite  the  commitment  expressed  in  the 
2011  NRP,  the  plans  to  raise  the  age  ceiling  below  which  compliance  with  eligibility 
requirements  for  unemployment  benefits  are  actively  verified  by  the  National 
Employment  Service  have  not  been  implemented.  As  a  result,  compliance  with  the 
requirement to actively seek employment is not being actively followed up by the federal 
authorities who provide benefits for job seekers over the age of 50. However, according 
to  the  coalition  agreement  and  the  national  reform  programme,  this  age  ceiling  will  be 
raised  in  two  stages  to  55  (in  2013)  and  58  (by  2016).  Legislative  proposals  on  this 
matter are still in the pipeline.13  

 Lastly,  despite  the  persistent  high  tension  and  the  numerous  shortages  on  the  labour 
market,  Belgium  is  one  of  the  few  EU  countries  where  the  level  of  participation  in 
lifelong  learning  fell  significantly  over  the  last  decade.  There  are  clear  differences 
between  the  policies  that  are  put  in  place  at  regional  level  to  deal  with  the  problem  of 
professions where there are shortages and skills mismatches (see Box 6). 

Box 6 — Progress in the area of lifelong learning and education  

As  a  response  to  the  high  tensions  and  shortages  on  the  labour  market  and  in  order  to  combat 
youth  unemployment,  all  communities/regions  have  developed  measures  to  identify  and 
anticipate  skills  gaps.  Closer  cooperation  between  the  labour  market  and  education,  as  well  as 
measures to reform vocational education and training are considered to be priorities in the current 
education and training policies. 

The  Flemish  Community  has  developed  an  integrated  policy  to  deal  with  shortage  professions, 
simultaneously pursuing reform of the schooling system to re-evaluate technical and vocational 
education and enhanced cooperation between training centres and sector organisations in order to 
develop a lifelong learning offer attuned to the needs of the labour market. At the same time, the 
Flemish  regional  employment  service  is  pursuing  a  proactive  policy  of  career  reorientation, 
encouraging  job  seekers  with  qualifications  that  are  less  in  demand  to  explore  new  horizons  in 
future-oriented sectors. Although similar efforts are undertaken in the French Community, their 
targets  are  less  ambitious  and  they  are  less  integrated.  Moreover,  the  current  horizon  of  the 
reform is 2014 and it is not complemented by an evidence-based strategy to tackle early school 
leaving, despite the fact that early school leaving rates are higher than the national average and 

12  In  Belgium,  the  various  policies  regrouped  under  this  denominator  are a matter of shared competence 
between the different levels of government. The federal government is responsible for both structural and 
targeted social security reductions and for the follow-up and penalisation of the unemployed. The regions, 
for their part, are responsible for placement of jobseekers via the regional employment offices whereas the 
communities are competent in matters related to education, vocational training and lifelong learning. 
13 It should be noted, however, that the Flemish Region has already invested heavily in the effectiveness of 
activation  policies by allocating significant financial and human resources to personalised job placement 
services and by extending the coverage of activation policies among the elderly to job seekers below the 
age  of  55.  This  age  ceiling  will  be  increased  to  the  age  of  58  as  of  June  2012.  For  now,  the  regional 
employment services in the Walloon Region and the Brussels Capital Region ensure coverage only up to 
the age of 50. 

  18

 
                                                 
especially worrying in Brussels (18.4 % in 2010 compared to a national average of 11.9 % and an 
EU  average  of  14.1  %).  Young  people  with  a  migrant  background  are  twice  more  at  risk  to 
become early school leavers (21.9 vs. 10.7 %). 

Belgium  has  held  its  ground  relatively  well  in  the  fight  against  poverty  and  social 
exclusion.  Despite  the  financial  and  economic  crisis,  both  the  ‘at-risk-of-poverty-or-
social-exclusion’-rate and the ‘relative-income-poverty’-rate have remained more or less 
stable  for  the  past  three  years  at  levels  below  the  corresponding  EU-27  averages. 
Nevertheless, in the case of pensioners Belgium is performing worse, with 21  % of those 
over the age of 65 being at risk of poverty (i.e. having an income of less than 60  % of the 
median) in 2010, compared to the EU average of 15.9  %. 

In 2011, Belgium was not issued a specific recommendation related to the fight against 
poverty and social exclusion, although the recommendation alluded to the need to target 
active labour market policies at vulnerable groups. Among these, migrants occupy a 
prominent  place.  While  the  average  EU  at-risk-of-poverty  rate  of  non-EU  nationals 
stands at 41.8 %, Belgium compares unfavourably with a rate of 63.4 %, the highest rate 
in the EU. Non-country nationals from within the EU perform better, with a rate of 25.5 
%  against  28.8  %  on  average  in  the  EU.  The  low  educational  attainment  and  the 
precarious labour market situation of migrants seem to be the main drivers behind these 
worrisome figures. At 39.6  %, the employment rate of non-EU nationals in Belgium is 
by  far  the  lowest  in  the  EU  and  the  differential  with  the  overall  employment  rate 
remained high over the past years. Moreover, non-nationals who do participate full-time 
in  the  labour  market  often  have  precarious,  temporary  jobs  and  are  more  often 
overqualified  compared  to  Belgians.  Migrants  are  also  far  more  exposed  to  the  risk  of 
relative  income  poverty  than  are  native  Belgians,  and  a  disproportionally  large  share 
number  of  these  lives  in  households  with  very  low  work  intensity,  exposing  them  far 
more than the native Belgian population to the risk of intergenerational transmission of 
poverty  and  social  exclusion.  A  comprehensive  strategy  is  required  to  integrate  these 
groups in the labour market. 

1.6.  3.4. 

Growth and competitiveness structural measures 

Cost Competitiveness  

Belgian  (cost  and  non-cost)  competitiveness  has  been  deteriorating  in  recent  years. 
The  current  account  has  worsened  and  Belgium  is  facing  losses  in  its  export  market 
share. 

  19

 
Figure  1:  Evolution  nominal  unit  labour  cost  in  Belgium,  its  neighbouring  countries  and  the  euro 
area 

1996=100

Nominal unit labour cost

140

135

130

125

120

115

110

105

100

1996

1998

2000

2002

2004

2006

2008

2010

2012f

BE

EA-17

EU-3 (DE FR NL)

Source: Ameco 

Unit  labour  costs  have  tended  to  increase  more  rapidly  in  Belgium  than  in  the 
neighbouring countries, especially since 2005 (see Figure 1). The government’s decision 
to limit real wage growth to 0.3  % over the period 2011-2012 (the so-called 'wage norm') 
could not prevent nominal wages from rising more than in the neighbouring countries, as 
inflation in Belgium was higher than expected at the start of the wage negotiations and 
above  that  of  the  neighbouring  countries.  In  this  respect,  promoting  the  use  of  "all-in 
clauses", allowing the temporary suspension of indexation in periods where inflation is 
above the wage increase allowed by the wage norm, would be useful. 

Higher wages are not a problem as long as they go hand-in-hand with quality products 
and  higher  productivity.  However,  Belgium  is  mainly  specialised  in  low  to  medium 
technology goods, for which competition on prices is more relevant than competition on 
quality.  Secondly,  productivity  growth  has  been  lower  than  in  Belgium’s  main  trading 
partners  and  the  euro  area.  The  2011  assessment  of  the  national  reform  programme 
suggested a reform of the wage-setting mechanism — including wage indexation — as 
one  of  the  ways  to  improve  competitiveness  (CSR  4).  However,  there  has  been  no 
progress  with  regard  to  reforming  the  system  of  wage  bargaining  and  wage 
indexation.  

Instead  of  reforming  the  wage-setting  mechanism,  the  current  government  is  aiming  to 
tackle  what  it  considers  to  be  the  real  cause  of  Belgium’s  deteriorating  cost 
competitiveness, namely the inflationary pressure resulting from surges in the prices 
of  energy  and  commodities.  Compared  to  the  euro  area  average,  Belgium  has  a  very 
high  pass-through  from  crude  oil  prices  to  headline  inflation.  Competitiveness  of  the 
Belgian  economy  could  also  be  improved  by  strengthening  (i)  competition  and 
supervision  of 
the  energy  sector  (making  prices  more  competitive)  and  (ii) 
energy/resource efficiency. 

(i) In order to monitor prices closely, the Price Observatory was granted extra powers 
by  the  caretaker  government  in  March  2011  to  conduct  surveys  in  sectors  where 
competition appears to be harmed, and to investigate price trends. The government has 

  20

 
 
 
frozen  energy  retail  prices  from  April  2012  onwards  until  the  end  of  the  year.  The 
government  has  also  announced  a  number  of  structural  measures  to  be  implemented  in 
the  coming  months,14  although  the  majority  of  those  do  not  focus  on  fostering 
competition,  but  rather  on  directly  reducing  the  end  consumer’s  final  energy  bill.15  
While measures to control inflationary pressures by limiting energy price increases 
are  welcome,  price  controls  cannot  be  the  preferred  tool  in  a  liberalised  energy 
market.  Price  controls  are  likely  to  impact  adversely  on  investment  in  the  Belgian 
energy sector, where insufficient investment in the generation sector is an issue, due to 
the ageing of many power plants. Such measures may also affect different players in the 
sector  unequally.  To  enhance  competition  in  a  structural  way  and  ensure  more 
competitive  energy  prices,  it  is  important  to  improve  the  cost  efficiency  of  the 
distribution  network16  and  to  lower  barriers  to  entry  (especially  in  the  wholesale 
market17).  In  this  respect,  the  efforts  to  enhance  the  interconnection  capacity  and  to 
integrate  the  physical  electricity  grid,  and  the  electricity  markets  of  Belgium  and  its 
neighbouring  countries,  need  to  be  continued.  This  would  also  help  to  balance  the 
expected shortfall in domestic production by 2015. 

There  is  room  to  improve  the  coordination  between  the  competition  authority  and  the 
sectoral regulators as a way of improving the enforcement of competition rules in the 
energy market. The Belgian authorities have announced substantial reforms, and a new 
structure for the Belgian competition authority is due to be created. However, it remains 
unclear  whether  the  new  authority  would  receive  sufficient  guarantees  in  terms  of 
independence and adequate resources. 

(ii)  Higher  energy  efficiency  would  not  only  improve  Belgium’s  environmental 
performance in terms of emissions and energy savings; it would also have an impact on 
energy  consumption  and  costs  (mainly  in  the  transport  and  household  sector),  with 
positive  spillovers  as  regards  competitiveness.  Belgium  has  developed  a  series  of 
measures on energy efficiency, covering most sectors. The focus is on the refurbishment 
of  existing  buildings  in  particular.  Ongoing  actions  to  tackle  residential  and  tertiary 
buildings,  as  well  as  the  extensive  renovation  of  public  buildings  through  promotional 
programmes, are expected to contribute towards improved energy efficiency. 

Non-cost competitiveness 

Apart  from  keeping  wages  and  (energy)  costs  under  control,  there  are  also  non-cost 
factors 
improve 
(R&D, 
competitiveness. 

education,  business 

environment) 

could 

that 

R&D intensity stagnated in the period 2000-2010, rising only from 1.97  % to 1.99  % of 
GDP. While public R&D expenditure increased in this period (from 0.55  % to 0.67  % of 
GDP),  private  expenditure  on  R&D  declined  (from  1.42   %  to  1.32   %  of  GDP)  due  to 
changes  in  the  economic  structure  which  has  become  more  service-oriented.  The 

14  In  particular,  the  federal  government  decided  to  oblige  GDF  Suez  to  divest  part  of  its  production 
capacity  (of  amortised  nuclear  plants)  and  sell  it  on  the  market.  Other  initiatives  such  as  on-line  price 
comparability  tools  for  electricity  and  gas  (provided  by  the  regulators  of  the  three  regions)  can  also 
increase transparency of energy prices for customers. 
15  They  refer  to  the  elimination  of  switching  fees,  support  for  renewable  energy,  suspension  during  9 
months of the transfer of money to the Kyoto fund, encouraging regions to work on reducing distribution 
tariffs, revision of the social tariff system and freezing of distribution tariffs until 2014. 
16 Distribution costs account for almost 40  % of end-user energy prices in Belgium. 
17  The  wholesale  electricity  market  is  dominated  by  the  incumbent  energy  company,  Electrabel 
(GDF/Suez), with a market share close to 80  %. 

  21

 
                                                 
dominance of the service sector in Belgium would justify specific measures to improve 
the  knowledge  intensity  of  the  service  sector  over  time.  The  federal  government  is 
allowing a 75  % payroll tax exemption for researchers, and all regions and communities 
have  developed  strategic  innovation  approaches  covering  major  aspects  of  a  successful 
innovation strategy.18 

Nevertheless,  there  is  a  case  for  the  national  and  regional  research  and  innovation 
policy  mixes  to  integrate  more  systematically  demand-side  policy  tools,  such  as 
innovative  public  procurement.  Moreover,  appropriate  mechanisms  need  to  be  put  in 
place to ensure that there is overall coherence among the various research and innovation 
policies undertaken at federal, community and regional levels and that opportunities for 
synergies are fully exploited. It is also very important to attract more young talent into 
science and engineering studies in order to avoid a skills shortage which may deter future 
private R&D investments. 

and 

burden 

principle 

(‘one-stop-shop’ 

In  order  to  further  improve  the  business  environment,  the  new  federal  government 
pledged  to  retain  some  fiscally  advantageous  treatment  of  SMEs,  to  reduce  the 
administrative 
electronic 
communication  with  the  government  institutions),  to  improve  the  social  status  of  self-
employed  people,  and  to  increase  R&D  efforts.    As  regards  the  implementation  of  the 
Services  Directive  in  Belgium,  some  restrictions  in  the  services  sector  still  remain,  in 
particular in the areas of tourism, real estate services, driving schools, vocational training 
and  the  regulated  professions.  Although  the  Belgian  point  of  single  contact  is  well 
established  and  the  provision  of  information  is  generally  good,  there  is  room  for 
improvement  in  terms  of  user-friendliness,  enhanced  online  completion  of  procedures, 
better integration between the central portal and the nine decentralised contact points and 
higher awareness of the contact point among business users. 

improved 

Competition in postal services, transport and telecom 

EU Directives have gradually opened up the postal market to competition, enabling new 
operators and innovative services to appear, thereby promoting competition in terms of 
quality  and  price  of  postal  services.  In  Belgium,  however,  the  amended  postal 
legislation  raises  serious  concerns,  particularly  the  provision  concerning  justifiable 
licensing  conditions.  Moreover,  the  incumbent  postal  operator  continues  to  be 
overcompensated for public service missions, in particular for press distribution.  

In  the  field  of  transport,  a  more  competition-driven  policy  should  be  pursued  to 
enhance further the functioning of the internal market for transport. In rail, the existing 
holding  structure  of  NMBS/SNCB,  covering  both  service  provider  and  infrastructure 
manager,  is  complex  and  non-transparent.  Moreover,  unlike  other  Member  States, 
Belgium  has  not  yet  opened  up  its  domestic  rail  passenger  market  to  competition. 
Progress  has  been  made  on  regulatory  services  for  railway  transport  and  for  airport 
operations,  although  there  is  scope  for  further  strengthening  their  independence. 
Modernisation  of  port  labour  legislation  would  also  make  it  possible  to  enhance  the 
efficient functioning of the internal market for transport in Belgium. 

18 In the Walloon Region the focus has been on supporting a limited number of competitiveness poles (a 
cluster  approach).  In  the  Flemish  Region,  the  willingness  to  address  through  innovation  some  specific 
societal challenges is a main driver of research & innovation policy. In the Brussels Capital Region, the 
preparation  of  a  new  research  &  innovation  strategy  has  started  in  2011;  it  will  include  a  ‘smart 
specialisation’ approach. 

  22

 
                                                 
Despite the liberalisation of the telecom sector, the market is still dominated by the 
incumbent  firm,  although  in  the  Flemish  Region  a  second  player  is  providing  fierce 
competition. In conjunction with the failure of network sector regulators to introduce a 
level playing field to allow new entry and expansion of competitors, this situation leads 
to  higher  prices  than  in  other  countries.  Despite  the  major  penetration  of  broadband, 
Belgium has one of the lower take-up rates of mobile internet. As the dissemination of 
mobile  internet  crucially  depends  on  the  availability  of  radio  spectrum,  the  fact  of 
making spectrum19 available for wireless broadband will help reduce the digital divide, 
introduce greater choice in broadband, and enable innovation in other sectors. 

Finally,  Belgium  lacks  an  independent  state  aid  coordinator  that  vets  domestic  state 
aid;  and  a  central  state  aid  register,  which  would  enable  better  monitoring  of  public 
expenditure and speed up progress in state aid investigations. 

Competition and regulation in the retail sector 

As  far  as  regulation  is  concerned,  according  to  the  OECD  Product  Market  Regulation 
(2008)  indicator  the  retail  sector  in  Belgium  is  more  highly  regulated  than  in  other 
euro area countries20; only Luxembourg has a more stringent regime. Despite Belgium’s 
poor  ranking,  it  should  be  acknowledged  that  improvements  have  been  made  in  recent 
years,  under  the  new  law  on  ‘market  practices  and  consumer  protection’  and  the  ‘Ikea 
law’ (2004).21 Nevertheless, Belgium still has some operational restrictions, especially in 
terms of specific (zoning) regulation of large outlets and the regulation of shop opening 
hours. A recent report by the National Bank of Belgium22 indicates that the retail sector 
would benefit from simplifying and streamlining existing laws, as already the existence 
of these laws (even if they are not very restrictive) can influence the way market players’ 
perceive obstacles that are likely to limit competition. 

As  for  competition,  the  Belgian  retail  market  is  less  concentrated  overall,  and  profit 
margins  are  lower  than  in  the  euro  area  on  average,  which  indicates  a  high  level  of 
competition. Nevertheless, in terms of prices, Belgium turns out to be one of the most 
expensive countries, with a price level that is more than 10  % above the euro area 
average. These price levels are not only determined by competition and regulation, but 
also  by  the  structural  aspects  of  the  country  (such  as  relative  income  levels  and  VAT 
rates). In the specific case of supermarkets, similar products are between 7.5  % and 10  
%  more  expensive  in  Belgium  on  average  than  in  the  neighbouring  countries.23  A 
number  of  factors  contribute  to  the  explanation  of  these  higher  prices,  including 
structural features of supermarkets, in particular higher wage bills due to a high share of 
older  workers  and  strong  trade  unions  (compared  to  the  Netherlands  for  example), 
barriers  to  entry,  some  aspects  of  labour  market  regulations  and  some  contractual 
practices in the retail sector.  

19 In particular, the 800MHz band, which is a very suitable frequency band for wireless broadband, is still 
allocated  to  broadcasting.  More  cooperation  is  needed  between  the  Federal  government  and  the 
communities to allocate the 800 MHz band to wireless broadband services. 

20 Source: OECD Economic Policy Reforms – Going for Growth 2012. 
21 In particular, regarding less stringent zoning laws for new outlets, allowing tied sales (with the exception 
of financial services), loosening the ban on sales below costs and reducing the black-out period and 
limiting this to the clothing market. 

22 Cornille, D., Langohr, J. (2011), ‘The distributive trade sector and its impact on euro area prices’, NBB 

Economic Review, December 2011, pp. 35-52. 
(2012), 

23  FPS  Economy 
http://economie.fgov.be/fr/binaries/etude_niveaux_prix_supermarches_tcm326-163021.pdf. 

‘Niveau 

dans 

prix 

les 

de 

supermarchés’.  Available 

at: 

  23

 
                                                 
Climate and energy 

Road transport offers considerable potential for lowering non-ETS greenhouse gas 
emissions.  Moreover,  congestion  (concentrated  in  bottlenecks  around  Brussels  and 
Antwerp  and  on  some  trunk  roads)  is  also  placing  a  particularly  heavy  burden  on  the 
Belgian  economy  and  environment.24  Road  pricing  or  congestion  charges  could  reduce 
negative transport externalities. In addition to a greener taxation system, a more efficient 
public  transport  service  and  an  increased  coordination  between  the  different  levels  of 
power could contribute to a solution. The buildings sector also has a significant potential 
for emission reduction and will require additional measures if it is to meet the reduction 
targets. 

In 2011, Belgium has not adopted sufficient measures or policy initiatives to address 
this situation. This may be due in part to the fact that there was a caretaker government 
in  place  at  the  federal  level,  and  the  fact  that  this  was  the  year  in  which  the  Flemish 
Region  was  developing  its  mitigation  plan  towards  2020.  The  coalition  agreement  of 
December 2011 identifies a number of new climate-related policy initiatives that are to 
be  implemented  in  2012  and  2013.  To  ensure  that  investments  are  made  in  renewable 
energy  in  the  building  sector,  a  ‘climate  accountability  system’  is  planned.25  A  second 
source of investments in renewable energy will be in the form of contributions from the 
nuclear power sector. 

1.7.  3.5. 

Modernisation of public administration 
The administrative burden fell from 2.55  % of GDP to 1.43  % between 2000 and 2010.26 
However, inefficient government bureaucracy is still listed as one of the three major 
problems  in  terms  of  doing  business  in  Belgium.27  Belgium’s  overall  performance  as 
regards responsive administration is in line with the EU average, although in terms of the 
time and cost to transfer property, its performance is worse.28 The procedures for starting 
up a business seem less complex in Belgium than in the EU: it takes only four days to 
start  up  a  new  business  compared  to  two  weeks  in  the  EU  on  average,  and  the  cost  of 
enforcing  contracts  is  also  lower  (16.6   %  of  the  claim  compared  to  the  EU  average  of 
20.84  %). The country also performs fairly well on indicators linked to paying taxes. On 
the policy front, the procedures for e-invoicing have been simplified at federal level, and 
property registration has been tightened up for entrepreneurs by the introduction of time 
limits and implementation of the ‘e-notariat’ system. Belgium has also recently adopted a 
package  to  modernise  its  public  procurement  legislation.  On  the  other  hand,  a 
considerable amount of time and effort is still spent on obtaining permits, which is partly 
due to the increase in environmental legislation. Initiatives are being taken at the federal 
and regional levels to simplify and streamline investment procedures, and to enhance the 
performance of the authorities. 

24 The estimates of the cost of congestion in Belgium range from 0.05  % of GDP to 2  % of GDP, which 

are among the highest in Europe. 

25 This system will set multi-annual targets for the regions and will allocate bonuses to regions that exceed 
targets (that are in turn expected to be invested in emission reduction measures). 
26 Sixth edition of the survey on administrative burdens, commissioned by the Agency for administrative 

simplification. 

27  Third  factor  behind  ‘restrictive  labour  regulations’  and  ‘tax  rates’  (World  Economic  Forum  Global 
Competitiveness Report 2011-2012). 
28 World Bank, Doing Business 2012, Belgium. 

  24

 
                                                 
As  regards  directives  relating  to  the  internal  market,  the  increase  in  the  backlog  in 
terms of transposition in Belgium has been one of the highest,29 and more than half of the 
total number of directives outstanding for Belgium (18 out of 30) are in the areas of the 
environment, financial services and transport. 

29 According to the official results presented in ‘Making the Single Market deliver — Annual governance 
check-up  2011’  (cut-off  date:  10  November  2011)  and  in  the  ‘Internal  Market  Scoreboard’, No 23/2011 
(cut-off date: 10 May 2011) respectively.  

  25

 
                                                 
4. 

OVERVIEW TABLE  

2011 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR  1:  Take  advantage  of  the  ongoing  economic 
recovery to accelerate the correction of the excessive 
deficit.  To  this  end,  take  the  necessary  specified 
measures  —  mainly  on  the  expenditure  side  —  by 
the  time  of  the  2012  budget  to  achieve  an  average 
annual fiscal effort in line with the recommendations 
under  the  EDP,  thus  bringing  the  high  public  debt 
ratio  on  a  declining  path.  This  should  bring  the 
government  deficit  well  below  the 3  % of the GDP 
reference value by 2012 at the latest. Ensure progress 
towards the medium-term objective by at least 0.5  % 
of GDP annually.  

CSR  2:  Take  steps  to  improve  the  long-term 
sustainability  of  public  finances.  In  line  with  the 
framework  of  the  three-pronged  EU  strategy,  the 
focus  should  be  put  on  curbing  age-related 
expenditure,  notably  by  preventing  early  exit  from 
the  labour  market  in  order  to  markedly  increase  the 
effective  retirement  age.  Measures  such  as  linking 
the statutory retirement age to life expectancy could 
be considered.  

  26

to 

to 

to 

an 

the 

the 

under 

forecast, 

contribute 

"unchanged 

recommendation. 

At  the  moment  Belgium  has  only  partially 
implemented 
In 
December  2009,  the  Council  recommended  that 
Belgium  should  bring  the  deficit  down  below  3  
the  Commission 
%  of  GDP.  According 
services'  2012  spring 
the  general 
government  deficit  is  expected    to  come  out  at 
about 3  % of GDP in 2012, the official objective 
being 2.8 %. However, the current estimate of the 
2012  deficit  is  practically  at  the  3  %  threshold, 
and this only thanks to sizeable one-off measures. 
policy" 
Moreover, 
assumption the deficit is expected to rise again to 
3.3  %  of  GDP  in  2013.  Therefore  permanent 
monitoring  of  public  finances  will  be  required 
and  additional  consolidation  measures  may  be 
needed  in  2012  and  especially  2013  to  make  the 
correction of the excessive deficit durable.   
So far, Belgium has partially implemented the 
recommendation. Although it does not constitute 
a  radical  overhaul  of  the  existing  system,  the 
recent  reform  of  Belgian  old-age  social  security 
(i.e.  pensions  and  ‘preretirement’  schemes)  is 
expected 
long-term 
sustainability  of  public  finances  as  (i)  age  and 
career  requirements  for  early  retirement  will  be 
tightened, (ii) ‘pre-retirement schemes’ within the 
unemployment  benefit  system  will  become  less 
accessible,  (iii)  public  sector  pensions  will  be 
calculated  on  a  less  advantageous  basis,  and  (iv) 
periods  of  inactivity  will  accrue  less  pension 
rights in the private sector. Nevertheless, it is too 
soon  to  tell  whether  this  reform  is  actually 
ambitious  enough  to  safeguard  sustainability  in 
the long term. Its impact will depend crucially on 
the  way  of 
the  monitoring 
arrangements that are put in place and the extent 
to  which  potential  abuse  of  possible  loopholes 
(for  instance,  within  the  sickness  and  disability 
schemes)  is  tackled.  Also,  in  order  to  encourage 
active  ageing  and  longer  working  lives,  these 
measures  in  the  area  of  pension  reform  would 
have to be accompanied by labour market reforms 
that  stimulate  higher  employment  rates  among 
older  workers  by  providing  better  access  to 
lifelong learning, making job search requirements 
obligatory for older workers, adapting workplaces 
to a more diverse workforce, tackling the abuse of 
early  exit  programmes  by  companies  undergoing 
employment 
restructuring 
opportunities  for  all  older  workers.  Although  the 
federal  government  has  already  tabled  several 
initiatives  in  this  regard,  not  all  have  been 

implementation, 

developing 

and 

 
 
CSR  3:  Address  the  structural  weaknesses  in  the 
financial 
finalising 
restructuring  of  the  banks  in  need  of  an  adequately 
funded and viable business model. 

in  particular  by 

sector, 

implemented  and  the  magnitude  of  the  challenge 
requires sustained efforts in coming years. 

implemented 

Belgium  has  partially 
the 
recommendation.  The  supervisory  framework 
for the financial sector has been reformed, in line 
with  what  was  decided  at  European  level  (all 
supervisory activities have been the responsibility 
of  the  National  Bank  of  Belgium  since  1  April 
2011). Moreover, the new government introduced 
measures  to  ensure  stricter  supervision  of  banks 
(request for an action plan in the event of a crisis, 
and  a  ban  on  paying  out  bonuses  for  banks  that 
receive state aid). Despite the initiatives taken by 
the  government  for  enhanced  supervision  of  the 
banking  sector,  Belgium  needs  to  continue  to 
make  efforts  to  further  restore  confidence  in  the 
banking sector. Nationalisation of Dexia Belgium 
and  the  guarantees  provided  by  the  government 
should ensure that the collapse of Dexia does not 
have  an  impact  on  the  real  economy,  while 
avoiding distortion of competition.  

CSR 4: Take steps to reform, in consultation with the 
social  partners  and  in  accordance  with  national 
practice,  the  system  of  wage  bargaining  and  wage 
indexation, to ensure that wage growth better reflects 
developments 
and 
labour 
competitiveness. 

productivity 

in 

in  which 

CSR  5:  Improve  participation  in  the  labour  market 
by  reducing  the  high  tax  and  social  security  burden 
for  the  low-paid  in  a  budgetary  neutral  way  and  by 
introducing  a  system 
level  of 
unemployment benefits decreases gradually with the 
duration  of  unemployment.  Take  steps  to  shift  the 
tax burden from labour to consumption, and to make 
tax  system  more  environmentally  friendly. 
the 
Improve  the  effectiveness  of  active  labour  policies 
by 
targeting  measures  at  older  workers  and 
vulnerable groups. 

the 

not 

has 

implemented 

Belgium 
the 
recommendation.  The  new  federal  government 
has  no  plans  to  reform  the  mechanism  of  wage 
bargaining  or  automatic  wage  indexation.  A 
strategy  to  boost  the  Belgian  economy  and  to 
improve competitiveness has been announced.  

in 

the 

social 

the  various 

implemented 

regionalisation  of 

Belgium  has  partially 
the 
recommendation. The coalition agreement of the 
new  federal  government  contains  a  number  of 
measures 
fields  concerned, 
including  reform  of  the  unemployment  system, 
improved  activation  policies  for  older  workers 
and 
security 
reductions  to  target  the  less  favoured  groups  in 
the  various 
labour  markets  more 
effectively.  Most  of  the  proposed  measures  are 
outlined  in  considerable  detail,  and  provide  for 
periods. 
comparatively 
Implementation is either already under way (as in 
the case of unemployment reform) or due to take 
place  in  the  near  future  (as  in  the  case  of  the 
extension  of  job  search  requirements  to  elderly 
workers). 

transition 

regional 

short 

No  real  progress  has  been  made  as  far  as 
rebalancing  of  the  tax  burden  away  from  labour 
to  consumption  or  to  environmental  taxes  is 
concerned,  but  fiscal  consolidation  measures 
spared labour income. 

implemented 

Belgium  has  partially 
the 
recommendation.  In  March  2011,  the  caretaker 
government  announced  a  decision  to  give  the 
Price  Observatory  extra  powers 
to  conduct 
surveys in sectors where competition seems to be 
harmed, and to investigate price trends. The new 
government  announced  extra  measures 
in 
December  2011,  designed  especially  to  enhance 
the 
surveillance  of 

the  energy  sector  with 

CSR  6:  Introduce  measures  to  boost  competition  in 
the  retail  sector,  by  lowering  barriers  to  entry  and 
reducing  operational  restrictions;  and 
introduce 
measures to strengthen competition in the electricity 
improving 
and  gas  markets  by 
the 
regulatory  and 
the 
effectiveness  of 
competition authorities. 

further 
sectoral 

  27

 
minimum  objective  of  keeping  inflation  under 
control: (i) extra powers for the Price Observatory 
to conduct investigations in the energy sector; (ii) 
stricter  control  over  energy  companies,  such  as 
GDF Suez (possibility of temporarily introducing 
a  maximum  price  for  electricity  and  gas  in  order 
to keep the price in line with the average price in 
the neighbouring countries, and the obligation on 
GDF  Suez  to  divest  part  of  its  production 
capacity);  (iii)  strengthening  the  independence 
and monitoring responsibilities of the CREG; and 
(iv)  a  simplified  procedure  for  consumers  to 
change their energy supplier. 

Instead  of  taking  steps  to  control  inflationary 
pressures  by  keeping  energy  prices  in  check,  it 
would  be  more  effective  to  implement  structural 
remedies  so  as  to  create  a  competitive  market  in 
the  energy  sector.  No  substantive  measures  are 
being  taken  to  improve  competition  in  the  retail 
sector. 

Euro Plus Pact (national commitments and progress) 

The  federal  government  has  committed  to  take 
measures  that  would  reduce  the  deficit  to  3.6   %  of 
GDP in 2011 and below 3  % of GDP in 2012. 

Real  wage  increases  in  2011-2012  are  to  be  kept  to 
no  more  than  0.3   %  (excluding  the  automatic  wage 
indexation).  This  would  mean  that  the  rise  in  unit 
labour  costs  (ULC)  would  be  kept  below  the  euro 
area average. 

  28

Due  to  (1)  a  number  of  isolated  factors,  mainly 
related to Dexia and the capital transfers from the 
regions  to  the  ‘holding  communal’  (one  of 
Dexia’s  main  shareholders)  and  (2)  lower-than-
projected revenues as a result of the deterioration 
in  the  macroeconomic  outlook  since  July,  the 
2011  deficit  stood  at  3.7   %  of  GDP,  which  is 
above the government’s target of 3.6  %. 

The  2012  budget  contained  measures  designed 
bring  the  deficit  back  down  to 2.8  % of GDP in 
2012  according  to  the  government.  After  having 
assessed  the  measures  in  the  budget  deal,  the 
Commission  arrived  at  a  reduced  figure  for  the 
deficit of 3¼ % of GDP. After taking into account 
the  commitment  of  the  federal  government  to 
freeze an extra EUR 1.3 bn (0.34  % of GDP), the 
deficit  would  be  lowered  to  2.9   %  of  GDP  in 
2012,  thereby  reaching  the  EDP  target  and 
bringing  the  excessive  deficit  to  an  end  in  time 
before the Council deadline is reached. In the first 
budgetary control exercise of the year, carried out 
took  additional 
in  March, 
measures  in  order  to  offset  the  impact  of  the 
downward  revision  in  growth  (about  zero  at  the 
moment  as  against  +0.8  %  in  the  budget).  The 
spring  2012  forecast  of  the  Commission  services 
project the deficit at about 3 % of GDP in 2012. 
Constant monitoring will thus be needed in order 
to  make  sure  that  further  slippages  of  the  deficit 
are avoided in the course of 2012. 

the  government 

Given  the  higher-than-expected  rate  of  inflation 
for  2011  (which  was  also  above  the  average  of 
the  three  neighbouring  countries),  the  measures 
taken to limit real wage growth to a maximum of 
0.3   %  over  the  next  two  years  are  unlikely  to 
keep  unit 
in  check,  because 
automatic  wage  indexation  will  lead  to  higher 
nominal wage increases compared to those of the 

labour  costs 

 
Belgium  will  take  steps  to  increase  the  actual 
retirement  age,  which  is  well  below  the  statutory 
retirement age of 65.  

neighbouring countries and the euro area average. 

In  December  2011  the  government  initiated  a 
reform  of  the  old-age  social  security  system  (i.e. 
pension  and  "‘preretirement  schemes"’)  with  a 
view to increase the effective retirement age by 2 
years on average by (i) tightening age and career 
requirements  for  early  retirement,  (ii)  ,  making 
"‘preretirement 
the 
schemes"’ 
unemployment benefit system less accessible, (iii) 
calculating  public  sector  pensions  on  a  less 
the 
advantageous  basis  and  (iv)  decreasing 
pension 
rights  accrued  during  periods  of 
inactivity.  Although  the  federal  government  has 
already  tabled  several  supporting  measures  to 
stimulate  active  ageing,  not  all  have  been 
implemented  and  the  magnitude  of  the  challenge 
requires sustained efforts in coming years. 

within 

In order to tackle the high inflation in Belgium, steps 
have been taken to keep energy prices under control. 
In March 2011, the caretaker government announced 
a  decision  to  give  the  Price  Observatory  extra 
powers 
in  sectors  where 
competition appears to be harmed, and to investigate 
price trends. 

to  conduct  surveys 

Instead  of  taking  steps  to  control  inflationary 
pressures  by  keeping  energy  prices  in  check,  it 
would  be  more  effective  to  implement  structural 
remedies  so  as  to  create  a  competitive  market  in 
the  energy  sector.  No  substantive  measures  are 
being  taken  to  improve  competition  in  the  retail 
sector. 

The  supervisory  framework  for  the  financial  sector 
has been reformed, in line with what was decided at 
European  level.  From  1  April  2011  onwards,  all 
supervisory activities will be the responsibility of the 
National  Bank  of  Belgium,  which  is  tasked  with 
micro-macro-prudential oversight. 

initiatives 
implemented  by 
to  enhance  supervision  of 

the 
Despite 
the 
government 
the 
banking  sector,  it  was  impossible  to  prevent  the 
collapse  of  Dexia  bank  in  October  2011,  and 
there  is  a  need  for  a  further  improvement  in 
banking sector supervision. 

Europe 2020 (national targets and progress) 

Employment rate target: 73.2  % or more 

R&D target: 3.0  % of GDP 

Greenhouse  gas  (GHG)  emissions  target:  -15    % 
(compared to 2005 emissions; ETS emissions are not 
covered by this national target 

Renewable energy target 13  % 

Energy  efficiency  —  reduction  in  primary  energy 
consumption by 2020 (in Mtoe) 

9.80 Mtoe 

  29

The  employment  rate  stood  at  67.1   %  in  2009 
and  67.3   %  in  2011. Further efforts and reforms 
will be needed to reach to the target of 73.2  %. 

Gross  domestic  expenditure  on  R&D  (in    %  of 
GDP) stood at 2.03  % in 2009 and 1.99  % 2010. 
This  suggests  that  there  has  been  no  progress 
towards achieving the target of 3  %.  

Change  in  non-ETS  GHG  emissions  between 
2005 and 2010: -1 % (this data corresponds to the 
current ETS scope). Projections based on existing 
measures point to an increase of 0.3  % by 2020, 
indicating  that  insufficient  progress  has  been 
made.  

Renewable  energy  as  a  percentage  of  gross  final 
energy  consumption  stood  at  4.6   %  in  2009. 
Belgium  has  already  achieved  its  2011/2012 
interim target for renewable energy. 

national 

The energy efficiency objectives are set according 
to 
national 
circumstances 
formulations. As the methodology for expressing 
the  2020  energy  consumption  impact  of  these 
objectives in the same format was not agreed until 
recently,  the  Commission  is  not  yet  able  to 
present its assessment. 

and 

 
Early school leavers: 9.5  % or less 

Tertiary education attainment: 47  % or more 

Reduction  of  population  at  risk  of  poverty  or  social 
exclusion: 380 000 (in number of persons) 

Early  school  leaving  (i.e.  the  share  of  the 
population  aged  18-24  with  lower  secondary 
education  at  best  and  not  in  further  education  or 
training) stood at 11.1  % in 2009 and 11.9  % in 
2010. This shows a slight deterioration, indicating 
that there has been no progress towards the target. 
The early school leaving rate of migrants is with 
substantially  higher  than  the  rate  for  native 
Belgians. 

Tertiary  educational  attainment  stood  at  42   %  in 
2009 and 44.4  % in 2010. Progress has therefore 
been made towards achieving the target.  

The number of people at risk of poverty or social 
exclusion  (in  1 000  persons)  stood  at  2 145  in 
2009  and  2 235  in  2010.  Hence,  the  progress 
made  in  2009  (a  reduction  of  49  compared  to 
2008) was undone in 2010.  

  30

 
 
ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2008

2009

2010

2011

2012

2013

2.6
-0.2
1.3
2.2
9.2
20.4
25.5

-2.5
122.1
-110.2
48.7
51.2
7.8

2.0
0.6
2.0
1.5
7.5
20.0
25.5

0.0
102.0
-91.8
49.6
49.6
5.7

2.1
1.5
2.8
2.5
7.8
21.4
25.7

-0.8
88.3
-76.4
48.8
49.5
4.0

-2.8
-2.3
0.0
-2.4
7.9
20.9
20.5

-5.6
95.8
-79.7
48.1
53.7
3.6

2.3
-1.2
2.3
1.2
8.3
20.2
23.3

-3.8
96.0
-80.2
48.9
52.7
3.4

1.9
-0.4
3.5
1.9
7.2
20.8
23.5

-3.7
98.0
-81.5
49.4
53.2
3.3

0.0
-1.4
2.9
0.2
7.6
21.0
22.9

-3.0
100.5
n.a
50.9
53.9
3.3

1.2
-1.3
1.8
1.1
7.9
21.1
23.0

-3.3
100.8
n.a
50.4
53.7
3.3

1.3

-0.1

1.0

0.9

3.8

1.9

0.8

1.3

n.a
n.a
13.5
22.9

-88.5
-5.2
12.7
20.5

-115.8
6.6
12.3
23.3

-111.5
-5.1
14.5
23.2

-103.3
-5.4
13.4
20.8

-100.5
6.6
13.4
23.4

-108.0
4.4
11.7
22.0

2.8
217.3
38.5
8.7
21.1
9.8

5.7
240.6
38.9
12.0
22.1
12.1

4.1
197.9
39.1
8.9
22.8
10.5

5.3
209.1
39.7
8.8
23.1
11.9

3.5
207.2
38.9
8.6
22.8
10.2

5.0
244.4
39.4
10.2
21.6
10.7

Net financial assets, non-financial corporations
Net financial assets, financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non-tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

4.5
-34.4
3.8
1.8
0.0
42.5
47.1
4.7
109.2
102.8
105.8

2.7
-22.8
3.1
1.0
-0.2
39.6
49.6
4.9
109.9
98.8
92.1

4.8
-41.8
4.5
1.6
-0.1
41.0
48.4
4.6
104.4
100.5
98.7

0.3
-22.5
2.7
-0.6
-0.4
37.2
52.2
5.2
114.3
100.2
91.9

2.1
-17.9
1.7
1.8
-0.2
37.7
51.7
5.1
114.1
97.5
92.0

3.1
-13.8
2.7
1.8
-0.1
37.3
51.9
5.1
112.1
98.7
91.5

1.7
n.a
1.2
1.7
0.2
n.a
n.a
n.a
113.9
97.0
91.5

4.0
n.a
39.6
8.9
23.3
10.3

n.a
n.a
13.8
23.3

4.0
n.a
39.2
9.0
23.4
10.3

1.8
n.a
1.3
1.7
0.2
n.a
n.a
n.a
114.1
97.1
91.7

Source :
Commission spring 2012 forecast

  31

 
 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2011
COM SP
1.9
0.8
5.0
5.0
5.0

1.9
0.7
5.1
4.8
4.9

2012
COM SP
0.1
-0.2
0.4
0.4
0.5

0.0
0.1
0.7
0.8
1.1

2013
COM SP
1.3
0.2
1.2
2.4
2.0

1.2
1.2
1.6
4.2
4.1

1.6
0.2
0.0
-0.4
1.3
7.2
0.5
3.5
2.2
3.3
2.1

1.6
0.3
0.1
-0.6
1.2
7.2
0.6
3.5
2.3
3.4
2.0

0.3
-0.1
-0.2
-1.4
0.0
7.6
-0.1
2.9
2.1
3.1
1.7

0.1
0.0
0.0
-1.6
0.2
7.5
-0.1
3.0
2.2
3.3
1.5

1.1
0.0
0.1
-1.3
0.4
7.9
0.9
1.8
2.2
2.3
1.8

0.9
0.1
0.4
-1.4
0.3
7.8
1.0
1.9
2.2
3.4
2.2

2014
SP
1.7
1.0
1.5
3.5
3.0

1.2
0.0
0.5
-0.9
0.7
7.8
1.0
1.8
1.9
2.8
2.6

2015
SP
1.8
1.3
2.1
4.0
3.7

1.5
-0.1
0.4
-0.3
1.0
7.5
0.8
1.8
1.8
2.3
2.6

Note:
1In percent of potential GDP, with potential GDP growth according to the programme as recalculated by Commission.

Source :

Commission’ spring 2012 forecasts (COM); Stability programme (SP).

  32

 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2011

2012

2013

2014

2015

Change: 
2011-2015

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

COM
49.4

COM
50.9

12.6
15.9
16.7
4.2
53.2

12.9
16.5
16.9
4.6
53.9

SP
51.3

13.1
16.7
17.0
4.5
54.0

COM
50.4

12.9
16.4
16.8
4.3
53.7

SP
51.3

13.0
16.9
17.1
4.3
53.5

SP
51.6

13.1
17.0
17.1
4.4
52.7

SP
52.0

13.2
17.1
17.1
4.6
52.0

49.8

50.5

50.5

50.4

50.0

49.3

48.6

SP
2.6

0.6
1.2
0.4
0.4
-1.2

-1.2

3

0.1

0.1

-2.2

-1.4

-0.6

-0.9

-0.9

-2.6

-1.3

-1.4

-1.4

-0.4

-3.5

-0.1

-0.3

-2.0

-1.6

-3.4

16.1

16.3

16.5

15.4

15.8

16.3

16.1

-2.7
0.7

-2.6
0.1

-2.3
1.1

0.5
-0.1
-0.2
-0.6
0.1
3.7
3.8
0.1
3.6

25.9
2.6
1.6
3.7
3.5
-2.2
1.3
0.0
-2.2

25.2
2.6
1.7
4.1
3.3
-3.7
-0.4
-0.1
-3.6

25.8
2.5
1.5
3.6
3.4
-1.1
2.3
0.0
-1.1

26.0
2.6
1.6
4.0
3.3
-3.3
0.0
0.0
-3.3

25.8
2.7
1.8
3.8
3.5
-2.8
0.7
0.3
-3.1

25.8
2.6
1.8
3.9
3.3
-3.0
0.4
0.5
-3.4

25.7
2.5
1.5
3.5
3.4
0.0
3.4
0.0
0.0

Compensation of employees and
intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically-adjusted balance2
Structural balance
Change in structural balance
Structural primary balance3
Change in structural primary balance
Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % GDP 
   against applicable reference rate
Two-year average deviation in % GDP 
   against applicable reference rate
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services on 
the basis of the information in the programme.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit 
and of discretionary measures.
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have 
also been applied to the years 2014 onwards.
6The (standard) reference rate applies starting in the year following which the country has reached its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.

0.40
-1.71

0.40
-1.89

0.40
-1.49

0.40
-1.38

0.40
0.52

0.40
0.76

-1.4
0.9

-0.6
0.7

2.1
0.9

2.8
0.6

0.7
0.7

1.2
1.3

3.5
0.8

0.7
0.0

0.1
0.8

-1.60

-1.80

-0.48

-2.60

-0.31

-3.50

-2.38

-3.08

1.40

1.40

1.40

1.45

1.40

1.93

1.40

1.40

n.a.

n.a.

3.5

3.6

3.6

-
-

-

-

-

Source :
Stability programme (SP); Commission services’ spring 2012 forecasts (COM); Commission services’ calculations.

  33

 
 
Table IV. Debt dynamics 

Average 
2006-10

90.6
0.8

-1.7
1.0

3.7
-1.0
-1.7
1.5

2011

98.0
2.0

0.4
-0.5

3.3
-1.7
-2.0
2.1

2012

2013

COM

100.5
2.5

-0.4
1.3

3.3
0.0
-2.0
1.5

SP

99.4
1.4

-0.7
1.4

3.5
-0.1
-2.0
0.7

COM

100.8
0.3

0.0
0.0

3.3
-1.2
-2.1
0.4

SP

97.8
-1.6

-1.3
0.1

3.4
-1.2
-2.1
-0.3

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance
2. S now-ball effect

Of which:
Interest expenditure
Growth effect
Inflation effect

3. S tock-flow adjustment

Of which:
Cash/accruals diff.
Accum. financial assets

Privatisation

Val. & residual effects

2011

2012

2013

COM/S P3

S P4

COM/S P3

S P4

Gap to the debt benchmark5,6

S tructural adjustment7

To be compared to:
Required adjustment8

-

-

-

-

-

-

-

-

-

-

-

-

-

0.9

0.3

-

0.9

0.3

2014
SP

95.5
-2.3

-2.3
0.0

3.4
-1.6
-1.8
0.0

2014
S P

-

0.7

0.0

2015
SP

92.3
-3.2

-3.4
0.1

3.4
-1.7
-1.6
0.1

2015
S P

-

0.8

0.0

Notes:
1End of period.
2The snowball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth 
and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual 
accounting, the accumulation of financial assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in SP assuming growth follows the COM  forecasts.

4Assessment of the consolidation path set in the SP assuming growth follows the SP projections.

5Not relevant during EDP that were ongoing in November 2011 and in the three years following the correction of the excessive 
deficit.

6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio does 
not comply with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were ongoing 
in November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State 
will comply with the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary 
projections are achieved.

Source :
Stability programme (SP); Commission spring 2012 forecasts (COM); Commission calculations.

  34

 
 
Table V. Sustainability indicators 

BE

No-policy 
change 
scenario 

Stability 
programme 
scenario

No-policy 
change 
scenario 

EU27

SCPs 
scenario

S2
of which:

Initial budgetary position (IBP)
Long-term change in the primary balance (LTC)
 of which:

pensions
health care and long term care
others

S1 (required adjustment)*

7.5

0.5
7.0

4.4
2.2
0.4
6.2

4.8

-1.9
6.7

4.1
2.1
0.4
2.1

2.9

0.7
2.3

1.1
1.5
-0.3
2.2

0.7

-1.6
2.4

1.2
1.5
-0.3
-0.1

Debt, % of GDP (2011)
Age-related expenditure, % of GDP (2011)
Source : Commission 2012 stability programme.
Note : the 'no policy change' scenario depicts the sustainability gap under the assumption that the 
budgetary position evolves according to the spring 2012 forecast until 2013. The 'stability programme' 
scenario depicts the sustainability gap under the assumption that the budgetary plans in the programme 
are fully implemented.
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.

98.0
28.1

82.8
25.8

Figure. Medium-term debt projection  

  35

 
 
Table VI. Taxation 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)
Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

              - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes 2
3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

2001

45.1

2005

44.8

2007

43.9

2008

44.2

2009

43.4

2010

43.9

10.9

11.1

10.9

10.7

10.6

10.9

6.9

0.7

1.4

1.9

7.0

0.7

1.5

1.8

7.1

0.7

1.3

1.7

7.0

0.7

1.2

1.8

6.9

0.7

1.3

1.7

7.1

0.7

1.3

1.7

22.6

21.9

21.2

21.7

22.0

21.9

2.1

6.1

3.3

2.3

1.8

6.2

3.7

2.3

1.8

6.2

3.6

2.1

1.9

6.2

3.7

2.0

1.9

5.2

3.6

2.0

1.9

5.4

3.7

2.1

47.8

50.0

51.3

48.7

46.9

48.4

Note: 
1 T ax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), 

T axation trends in the European Union, for a more detailed explanation.

2 T his category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 T he VAT  efficiency is measured via the VAT  revenue ratio. T he VAT  revenue ratio is defined as the ratio between the actual VAT  revenue collected and the revenue 

that would theoretically be raised if VAT  was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large 

exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See 

European Commission (2011), T ax reforms in EU Member States, European Economy 5/2011, for a more detailed explanation.

Source: Commission

  36

 
 
 
Table VII. Financial market indicators 

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans)1)
              - capital adequacy ratio (%) 1), 2)
              - return on equity (%) 1), 3)
Bank loans to the private sector (year-on-year % change)
Lending for house purchase (year-on-year % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries receiving official financial assistance  (% of GDP)4)
Private debt (% of GDP)
Gross external debt (% of GDP)5)
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) Latest data December 2010.
2) The capital adequacy ratio is defined as total capital divided by risk weighted assets.   
3) Net income to equity ratio. 
4) Covered countries are IE, EL, PT, RO, LV and HU.

2007

2008

2009

2010

2011

387.9
83.4
24.8

368.7
80.8
26.8

340.0
77.1
60.7

320.2
74.9
…

324.2
…
…

1.2
11.3
13.3
18.5
5.8
74.5
4.6
28.0
99.7

52.7
45.3
11.2
…

1.7
16.4
-35.7
-0.2
-23.8
70.5
7.9
26.8
96.1

62.3
95.7
43.3
45.1

3.1
17.3
-2.5
-5.1
-8.1
65.2
3.9
16.6
94.5

60.5
87.7
67.9
66.1

2.8
19.3
10.6
-2.4
6.6
62.4
0.8
14.1
89.0

59.7
90.2
71.9
95.2

...
...
...
-1.8
-1.1
60.1
4.9
10.5
84.4

53.6
90.4
162.5
173.3

5) Latest data 2011Q3.
* M easured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

  37

 
Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)
Long-term unemployment2  (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)

2006

2007

2008

2009

2010

2011

66.5

67.7

68.0

67.1

67.6

67.3

0.7

2.7

1.5

-0.6

1.5

0.5

58.8

60.3

61.3

61.0

61.6

61.5

74.0

75.0

74.7

73.2

73.5

73.0

32.0

34.4

34.5

35.3

37.3

38.7

22.3

22.3

22.8

23.6

24.3

25.3

41.3

40.8

41.1

41.6

42.5

43.7

7.4

8.7

8.3

4.2

7.6

8.6

7.5

3.8

8.0

8.3

7.0

3.3

8.7

8.2

7.9

3.5

9.1

8.1

8.3

4.1

10.0

9.0

7.2

3.5

20.5

18.8

18.0

21.9

22.4

18.7

Youth NEET3 rate (% of population aged 15-24)

11.2

11.2

10.1

11.1

10.9

:

:

:

0.5

0.4

0.1

1.0

2.7

0.5

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not 
in further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed 
(annual % change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

12.6

12.1

12.0

11.1

11.9

41.9

41.3

42.3

42.5

43.8

1.6

0.1

1.4

1.1

1.8

1.2

-0.4

1.7

1.0

2.1

-0.8

0.4

-1.3

1.4

4.5

2.3

-2.7

-1.3

-1.3

-0.1

3.9

2.6

1.4

0.4

1.0

-0.4

0.0

-1.8

Real unit labour cost growth (annual % change)

-0.5

-0.2

Notes:

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

  38

 
Table VIII. Labour market and social indicators (continued) 

Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

7.54
1.91
8.44
2.04
3.45
0.07
27.3
1.04

7.26
1.84
8.49
2.02
3.41
0.13
27.1
1.10

7.29
1.79
8.19
2.07
3.27
0.14
26.8
1.15

7.53
1.88
8.68
2.06
3.31
0.23
28.1
1.36

8.17
2.05
9.45
2.23
3.83
0.23
30.4
1.43

2006

2007

2008

2009

2010

21.5

21.6

20.8

20.2

20.8

21.4

21.6

21.3

20.5

23.2

25.2

14.7

25.0

15.2

22.9

14.7

23.1

14.6

21.0

14.6

9707

9787

10046

10494

10398

6.4

5.7

5.6

5.2

5.9

14.3

13.8

11.7

12.3

12.6

4.2

4.4

4.8

4.6

4.5

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

  39

 
 
Table IX. Product market performance and policy indicators 

2002-
2006

1.3

2.8

1.6

2.9

3.1

2002-
2006

n.a.

n.a.
1.9

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, water 
(annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

Policy indicators

Enforcing contracts3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

2007

2008

2009

2010

2011

1.2

4.4

-0.8

-2.7

1.5

1.5

-0.7

n.a.

n.a.

n.a.

-2.0

-2.7

-3.9

n.a.

n.a.

-1.3

-2.8

-2.6

0.1

n.a.

3.1

2.7

n.a.

n.a.

n.a.

2007

2008

2009

2010

2011

505

4
1.9

505

4
2.0

505

4
2.0

505

4
2.0

38.7

41.5

42.9

42.0

44.4

505

4
n.a.

n.a.

6.0

6.0

6.5

n.a.

n.a.

n.a.

2005

2006

2008

2009

2010

2011

n.a.

n.a.

n.a.

n.a.

1.4

3.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

2.0

1.9

1.8*

n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2Patent data refer to applications to the European Patent Office (EPO). They are counted according to the year in which 
they were filed at the EPO. They are broken down according to the inventor's place of residence, using fractional counting if 
multiple inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.

5 Aggregate ET CR.
*figure for 2007.

Source :

Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

  40

 
Table X. indicators on Green growth 

Belgium

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2001-
2005

0.22
0.55
0.70
n.a.
-3.0%
10
1.24
9.4%
5.1%

0.26

11.3

0.07
n.a.
n.a.
83.9%
n.a.
0.49
1.28
-0.3%

79.5%
n.a.
0.28
1.5%

2006

2007

2008

2009

2010

0.21
0.49
0.66
0.21
-4.6%
10
6.8
9.3%
4.8%

0.23

11.0

0.08
0.01%
0.01%
88.0%
39.8%
0.40
1.08
-1.5%

79.8%
0.23
0.28
2.3%

0.20
0.46
0.64
0.19
-3.7%
10
-2.2
9.1%
4.7%

0.22

10.8

0.09
0.01%
0.02%
88.8%
39.7%
0.38
1.03
0.7%

77.1%
0.27
0.28
2.7%

0.20
0.46
0.64
0.17
-5.4%
11
21.7
8.3%
4.4%

0.22

10.1

0.10
0.01%
0.01%
91.2%
41.0%
0.44
1.07
-1.2%

79.9%
0.22
0.29
3.1%

0.21
0.44
0.63
n.a.
-3.3%
11
-12.9
8.5%
4.7%

0.19
9.6
0.10
0.01%
0.02%
93.7%
37.1%
0.46
1.11
n.a.

74.2%
0.20
0.30
3.9%

0.21
n.a.
n.a.
n.a.
-3.9%
11
4.7
n.a.
n.a.

n.a.

n.a.
0.09
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

  41