Recommendation for a COUNCIL RECOMMENDATION on Belgium’s 2012 national reform programme and delivering a Council opinion on Belgium’s stability programme for 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Belgium, banking system, budgetary equilibrium, competitiveness, free competition, health care system, institutional reform, pay policy, public debt, reduction of gas emissions, tax reform, technical barriers to trade

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
COM(2012) 314 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Belgium’s 2012 national reform programme  

and delivering a Council opinion on Belgium’s stability programme for 2012-2015 

{SWD(2012) 314 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Belgium’s 2012 national reform programme  

and delivering a Council opinion on Belgium’s stability programme for 2012-2015 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  on  the  prevention  and  correction  of  macroeconomic  imbalances2, 
and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission3, 
Having regard to the resolutions of the European Parliament,4  

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

On  26  March  2010,  the  European  Council  agreed  to  the  European  Commission’s 
proposal  to  launch  a  new  strategy  for  jobs  and  growth,  Europe  2020,  based  on 
enhanced coordination of economic policies, which will focus on the key areas where 
action 
to  boost  Europe’s  potential  for  sustainable  growth  and 
competitiveness. 

is  needed 

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for 
the economic policies of the Member States and the Union (2010 to 2014) and, on 21 
October  2010,  adopted  a  decision  on  guidelines  for  the  employment  policies  of  the 

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OJ L 209, 02.08.1997, p. 1 
OJ L 306, 23.11.2011, p. 25 
COM(2012)314 final 
P7_TA(2012)0048 and P7_TA(2012)0047 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

Member States5, which together form the ‘integrated guidelines’. Member States were 
invited  to  take  the  integrated  guidelines  into  account  in  their  national  economic  and 
employment policies. 

On  12  July  2011,  the  Council  adopted  a  recommendation  on  Belgium’s  national 
reform programme for 2011 and delivered its opinion on Belgium’s updated stability 
programme for 2011-2014. 

On 23 November 2011, the Commission adopted the second Annual Growth Survey, 
marking  the  start  of  the  second  European  Semester  of  ex-ante  and  integrated  policy 
coordination,  which  is  anchored  in  the  Europe  2020  strategy.  On  14  February  2012, 
the  Commission,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  adopted  the  Alert 
Mechanism  Report6, in  which it identified Belgium  as  one  of  the Member States  for 
which an in-depth review would be carried out. 

On 2 March 2012, the European Council endorsed the priorities for ensuring financial 
stability,  fiscal  consolidation  and  action  to  foster  growth.  It  underscored  the  need  to 
give  priority  to  growth-friendly  fiscal  consolidation,  to  restore  normal  lending 
conditions  to  the  economy,  to  promote  growth  and  competitiveness,  to  tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration. 

On 2 March 2012, the European Council also invited the Member States participating 
in the Euro Plus Pact to present their commitments in time for their inclusion in their 
stability or convergence programmes and their national reform programmes. 

On  30  April  2012,  Belgium  submitted  its  2012  stability  programme  covering  the 
period 2012-2015 and its 2012 national reform programme. In order to take account of 
their  interlinkages,  the  two  programmes  have  been  assessed  at  the  same  time.  The 
Commission  has  also  assessed  in  an  in-depth  review,  under  Article  5  of  Regulation 
(EU) No 1176/2011, whether Belgium is affected by macroeconomic imbalances. The 
Commission  concluded  in  its  in-depth  review7  that  Belgium  is  experiencing  an 
external imbalance, although not excessive. 

Based  on  the  assessment  of  the  2012  stability  programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  the  macroeconomic 
scenario underpinning the budgetary projections in the programme is plausible for the 
years 2012 and 2013 and optimistic for the years 2014 and 2015 as it foresees GDP 
growth  to  be  substantially  higher  than  the  latest  estimates  of  potential  growth 
emerging from the Commission's 2012 spring forecast. The objective of the budgetary 
strategy outlined in the programme is to bring the deficit below 3% of GDP in 2012 
(to  2.8%  of  GDP,  down  from  3.7%  of  GDP  in  2011)  and  to  zero  in  2015.  The 
programme  confirms  the  previous  medium-term  budgetary  objective  (MTO)  of  a 
surplus of 0.5% of GDP in structural terms, which adequately reflects the requirements 
of the Stability and Growth Pact The planned 2012 headline deficit complies with the 
deadline set by the Council for the correction of the excessive deficit and the planned 
fiscal  effort  complies  with  the  EDP  recommendation  of  a  minimal  average  annual 

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Council Decision 2012/238/EU of 26 April 2012 
COM(2012) 68 final. 
SWD(2012)150 final 

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effort  of  ¾%  of  GDP  in  structural  terms.  The  planned  growth  rate  of  government 
expenditure,  taking  into  account  discretionary  revenue  measures,  complies  with  the 
expenditure benchmark of the Stability and Growth Pact in 2013  to 2015, but not in 
2012. Based on the (recalculated) structural budget balance8, the programme projects 
the structural balance to improve by 1.1 percentage point of GDP in 2012 and by about 
0.8%  of  GDP  on  average  over  the  period  2013-2015.  However,  there  are  risks 
stemming  from  the  fact  that  the  additional measures to be taken  from 2013 onwards 
are not yet specified and that the macroeconomic scenario from 2014 onwards is too 
optimistic.  The  government  debt,  which  at  98.0%  of  GDP  in  2011  is  well  above  the 
60% threshold, is planned by the programme to stabilise and then to decline to 92.3% 
in  2015,  which  would  imply  sufficient  progress  towards  meeting  the  debt  reduction 
benchmark  of  the  Stability  and  Growth  Pact.  Moreover, implicit liabilities  stemming 
from  the  guarantees  given  to  the  financial  sector  are  particularly  large.  The  rules-
based,  multi-annual  framework  for  general  government,  particularly  with  regard  to 
expenditure  would  benefit  from  enforcement  mechanisms  and/or  commitments  from 
the  regions  and  communities,  as  well  as  from  the  local  level,  in  order  to  meet  their 
allocated deficit targets. 

(9) 

The  costs  associated  with  ageing  should  be  addressed  and  a  structural  decline  in  the 
deficit should be achieved to reduce the high public debt. The new federal government 
agreed in December 2011 on a reform of the Belgian old-age social security system. 
An effective implementation and monitoring of the initiated statutory reforms is now 
necessary, with a view to raising the effective retirement age. Underpinning the reform 
of old-age social security by measures that stimulate active ageing and longer working 
are crucial, while further reforms, such as linking the statutory retirement age to life 
expectancy, would also help to achieve this goal. 

(10)  The Belgian financial system still faces considerable challenges. Restructuring of the 
Belgian  banks  is  on-going,  and  state  aid  granted  in  2008/2009  as  a  response  to  the 
financial  crisis  has  not  yet  been  fully  repaid.  Moreover,  given  the  high  level  of 
guarantees, the risks of the banking and public sectors are interrelated.  

(11)  The  current  account  is  gradually  deteriorating  over  time.  The  improvement  of  the 
services balance does not make up for the deterioration in the trade balance for goods. 
Belgian exports of goods have lost ground not only with respect to expanding world 
trade, but also with respect to other euro area countries and the euro area on average 
pointing to unfavourable domestic cost developments in unit labour costs compared to 
Belgium's main trading partners (NL, FR, DE) and the euro area as a whole. 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  wage  growth  from  exceeding  that  in  the  neighbouring  countries. 
Although  productivity  levels  are  high,  its  growth  is  weak  and  also  the  costs  of 
intermediary  inputs,  mainly  energy,  are  high.  Retail  gas  and  electricity  prices  have 
been frozen in order to limit inflation, but no concrete measures have been taken with 
respect  to  reforming  the  wage-bargaining  and  wage-indexation  system  itself.  The 
R&D  intensity  of  the  private  sector  has  stagnated  in  recent  years  and  shortage  of 
skilled professionals, particularly in sciences and engineering, could become a major 

8 

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. 

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barrier  in  terms  of  further  improving  the  innovation  performance  of the  Belgian 
economy.  

(12)  Some structural measures have been taken to boost employment of younger and older 
workers  and  to  bring  more  of  the  unemployed  into  the  work  force.  Belgium  has 
engaged  in  a  wide  reform  of  its  unemployment-benefit  system.  However  structural 
problems  in  the  labour  market  persist  and  more  could  be  done  to  tackle  them. 
Increasing  the  lifelong-learning  participation  rate  and  pursuing  the  reforms  in 
vocational education and training (VET) are crucial to improving the effectiveness of 
active  labour  market  policies  (ALMP),  in  particular  for  older  workers  and 
disadvantaged  groups,  such  as  people  with  a  migrant  background.  No  significant 
headway has been made on the reduction of the tax burden on labour. A new tax credit 
for the lowest wages was introduced in June 2011 but it has not proved sufficient to 
remedy the significant unemployment traps at the bottom of the pay scale. No shift of 
the  fiscal  burden  away  from  labour  towards  consumption  and/or  eco-taxes  has  been 
undertaken.  

(13)  Prices for many goods and services are generally higher than in other Member States, 
reflecting  weak  competitive  pressures  —  especially  in  the  retail  sector  and  network 
industries — and a weak supervisory framework. In the retail sector, barriers to entry 
and  operational  restrictions  remain  high.  In  particular,  competition-restricting 
regulations  still  restrict  opening  hours,  protect  incumbents  against  new  entry  and 
inhibit  the  spread  of  new  business  models  and  technologies.  A  common  competition 
problem in the network sectors in Belgium is the strong position of the incumbent and 
the  high  entry  barriers  compared  to  other  Member  States,  meaning  that  former 
monopolists in these sectors can still charge higher prices than a  competitive market 
would  allow.  The  Belgian  Competition  authority  is  being  reformed  but  it  remains 
unclear whether the new authority will be sufficiently independent and have adequate 
resources. 

(14)  While Belgium is on track to meet the target to increase the share of renewable energy 
in  the  economy,  progress  towards  reaching  the  15 %  reduction  target  for  greenhouse 
gasses (GHG) in the non-ETS9 sectors is forecast to be virtually non-existent. Belgium 
has  not  adopted  sufficient  measures  or  policy  initiatives  in  2011  to  address  this 
situation. 

(15)  Belgium  has  made  a  number  of  commitments  under  the  Euro  Plus  Pact.  These 
commitments, and the implementation of the commitments presented in 2011, relate to 
improving competitiveness, raising the employment rate, boosting the sustainability of 
public finances and strengthening financial stability. The Commission has assessed the 
implementation  of  the  Euro  Plus  Pact  commitments.  The  results  of  this  assessment 
have been taken into account in the recommendations. 

(16) 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Belgium’s  economic  policy.  It  has  assessed  both  the 
stability programme and national reform programme and presented an in-depth review. 
It  has  taken  into  account  not  only  their  relevance  for  sustainable  fiscal  and  socio-

9 

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 
most important sources of GHG emissions in the country. . 

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economic  policy  in  Belgium  but  also  their  compliance  with  EU  rules  and  guidance, 
given the need to reinforce the overall economic governance of the European Union by 
providing EU-level input to future national decisions. Its recommendations under the 
European Semester are reflected in recommendations (1) to (7) below.  

In  the  light  of  this  assessment,  the  Council  has  examined  Belgium’s  stability 
programme for 2012 and its opinion10 is reflected in particular in recommendation (1) 
below. 

In the light of the results of the Commission’s in-depth review and this assessment, the 
Council has examined Belgium’s national reform programme for 2012 and Belgium’s 
stability  programme.  Its  recommendations  under  Article  6  of  Regulation  (EU)  No 
1176/2011 are reflected in particular in recommendations (1), (4), (5) and (6) below, 

(17) 

(18) 

HEREBY RECOMMENDS that Belgium should take action within the period 2012-2013 to: 

1. 

2. 

3. 

4. 

5. 

Implement  the  budget  for  the  year  2012  to  make  sure  the  excessive  deficit  is 
corrected  by  2012.  Additionally,  specify  the  measures  necessary  to  ensure 
implementation  of  the  budgetary  strategy  for  the  year  2013  and  beyond,  thereby 
ensuring that the excessive deficit is corrected in a durable manner and that sufficient 
progress  is  made  towards  the  medium-term  budgetary  objective  (MTO),  including 
meeting  the  expenditure  benchmark,  and  ensure  progress  towards  compliance  with 
the  debt  reduction  benchmark.  Adjust  the  fiscal  framework  to  ensure  that  the 
budgetary  targets  are  binding  at  federal  and  sub-federal  levels,  and  increase 
transparency of burden-sharing and accountability across layers of government. 

Continue to improve the long-term sustainability of public finances by curbing age-
related  expenditure,  including  health  expenditure.  In  particular,  implement  the 
reform  of  pre-retirement  and  pension  schemes  and  introduce  measures  linking  the 
statutory retirement age with increases in life expectancy.  

Further increase capital of the weakest banks to underpin the strength of the banking 
sector so that it can play its normal role in lending to the economy.  

To boost job creation and competitiveness, take steps to reform, in consultation with 
the  social  partners  and  in  accordance  with  national  practice,  the  system  of  wage 
bargaining  and  wage  indexation.  As  a  first  step,  ensure  that  wage  growth  better 
reflects developments in labour productivity and competitiveness, by (i) ensuring the 
implementation  of  ex-post  correction  mechanisms  foreseen  in  the  'wage  norm'  and 
promoting all-in agreements to improve cost-competitiveness and (ii) facilitating the 
use  of  opt-out  clauses  from  sectoral  collective  agreements  to  better  align  wage 
growth and labour productivity developments at local level.  

Significantly  shift  taxes  from  labour  to  less  growth-distortive  taxes  including  for 
example  environmental  taxes.  Pursue  the  initiated  reform  of  the  unemployment 
benefit  system  to  reduce  disincentives  to  work  and  strengthen  the  focus  of 
employment  support  and  activation  policies  on  vulnerable  groups,  in  particular 
people  with  a  migrant  background.  Take  advantage  of  the  planned  further 
regionalisation of labour market competencies to boost interregional labour mobility 

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Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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and  to  strengthen  the  coherence  between  education,  life-long  learning,  vocational 
training  and  employment  policies.  Extend  existing  activation  efforts  to  all  age 
groups.  

6. 

7. 

Continue to strengthen competition in the retail sector by lowering barriers to entry 
and  reducing  operational  restrictions.  Introduce  measures  to  strengthen  competition 
in the network industries (electricity and gas, telecom, postal services and transport) 
by  revising  regulatory  barriers  and  reinforcing  the  institutional  arrangements  for 
effective enforcement of state aid rules. 

Take  measures  to  correct  the  lack  of  progress  towards  reaching  the  targets  for 
reducing  greenhouse  gas  emissions  from  non-ETS  activities,  in  particular  by 
ensuring a significant contribution to this goal from transport. 

Done at Brussels, 

For the Council 
The President 

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