COMMISSION STAFF WORKING DOCUMENT Assessment of the 2013 national reform programme and stability programme for BELGIUM Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Belgium’s 2013 national reform programme and delivering a Council Opinion on Belgium’s stability programme for 2012-16
Date: 2013-05-29
Institutions: European Commission
Subjects: Belgium, budgetary equilibrium, competitiveness, economic growth, economic recession, job creation, labour market, liberalisation of the market, reduction of gas emissions

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 351 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and stability programme for 
BELGIUM 

Accompanying the document 

Recommendation for a COUNCIL RECOMMENDATION  

on Belgium’s 2013 national reform programme and delivering a Council Opinion on 
Belgium’s stability programme for 2012-16 

{COM(2013) 351 final} 

EN 

   EN 

 
 
 
 
  
 
 
TABLE OF CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 5 

Economic developments and challenges...................................................................... 7 

Recent economic developments and outlook............................................................... 7 

Challenges .................................................................................................................... 8 

Assessment of policy agenda ..................................................................................... 11 

Fiscal policy and taxation........................................................................................... 11 

Financial sector .......................................................................................................... 17 

Labour market, education and social policies ............................................................ 18 

Structural measures promoting growth and competitiveness..................................... 21 

Modernisation of public administration ..................................................................... 28 

Overview table ........................................................................................................... 30 

Annex ......................................................................................................................... 37 

2 

 
 
 
 
EXECUTIVE SUMMARY 

Economic Outlook 

GDP contracted by 0.3% in 2012 and is expected to remain flat in 2013, as a result of 
weak  domestic  demand,  while  in  2014,  more  robust  domestic  demand  is  projected  to 
bring  about  1.2%  GDP  growth.  The  unemployment  rate  is  forecast  to  rise  from  7.6%  in 
2012 to 8% in 2013, and remain at this level in 2014. Consumer prices (HICP) are expected to 
increase by 1.3% in 2013 and 1.6% in 2014, as compared with 2.6% in 2012.  

Despite  considerable  consolidation  efforts,  the  correction  of  the  excessive  deficit  is  not 
yet sustainable. The 2012 headline deficit came out at 3.9% of GDP, as compared with the 
Belgian authorities' target of 2.8% of GDP (on the back of the Dexia recapitalisation, lower 
growth  and  spending  slippages  at  local  government  level),  with  the  average  annual  fiscal 
effort  since  2010  estimated  at  around  0.3%  of  GDP,  significantly  below  the  ¾%  of  GDP 
recommended by the Council. Under the current growth projections, the deficit is expected to 
remain around the 3% of GDP threshold in 2013 and 2014. Belgium’s public debt is expected 
to rise above 100% of GDP in 2013 (from 99.6% in 2012) and broadly stabilise in 2014. 

Key Issues 

1. Weak euro area growth and the sovereign debt crisis have had serious repercussions 
for growth and employment in the open Belgian economy. Moreover, Belgium is one of 13 
countries  identified  by  the  Commission  as  experiencing  macroeconomic  imbalances, 
particularly when it comes to the loss of export market share as a consequence of declining 
shares in goods exports that can be related among others to the country's labour costs and the 
high level of public debt. 

2. Belgium has made some progress in implementing reforms relating to the 2012 CSRs, 
though  they  vary  in  scope  and  ambition.  Despite  consolidation  efforts,  Belgium  failed  to 
meet  its  budgetary  targets.  A  pension  reform  has  been  implemented,  but  the    long-term 
sustainability  of  public  finances  is  still  at  risk.  Reforms  are  ongoing  to  improve  cost 
competitiveness  and  competition  and  raise  employment  and  education  levels,  but  more 
sustained efforts will be needed to ensure their success. Belgium has taken effective measures 
to stabilise its banking sector.  

3. Belgium’s challenges remain broadly the same as last year's and additional efforts will 
be needed to address public finances, competitiveness, labour and product markets, and 
greenhouse  gas  emissions.  Overall,  greater  coordination  between  regional  and  national 
governments is essential. 

•  Public  finances:  Belgium's  main  challenge  is  to  put  the  debt  ratio  firmly  on  a 
declining path by making progress towards its medium-term objective and by curbing 
age-related expenditure. Belgium did not bring the excessive deficit below 3% of GDP 
by the 2012 deadline and now foresees the correction of the excessive deficit by 2013. 
Some  of  the  consolidation  measures  are  not  structural  and  the  deficit  is  projected  to 
rise  again  in  2014.  Belgium's  medium-term  objective  is  to  reach  a  structural  budget 
surplus of ¾% of GDP by 2016, though this could be put at risk by the 2014 elections 

3 

 
and the absence of clear and transparent effort sharing among the  different layers of 
government..  The  pension  and  pre-retirement  reforms  represent  a  step  in  the  right 
direction,  but  given  the  magnitude  of  the  challenge  Belgium  faces,  they  are 
insufficient to secure the long-term sustainability of public finances. Additional efforts 
will be required to close the gap between the effective and the statutory retirement age. 
The long-term financial sustainability of the pension system would also benefit from 
measures linking the statutory retirement age to life expectancy.  

•  Competitiveness: Belgium has made limited progress on curbing the deterioration of 
its  overall  competitiveness,  a  result  of  non-cost  elements  such  as  the  country's 
innovation capacity and its geographical export specialisation and cost elements such 
as  the  price  of  intermediary  inputs  and  labour  costs  with  high  nominal  wage  growth 
and low productivity gains. The effectiveness of several measures adopted to address 
the  labour  cost  element  still  needs  to  be  established.  Given  the  persisting  challenge 
Belgium faces in this area, decisive reforms are called for, including not just remedial 
measures to address past hikes in unit labour costs but a thorough modernisation of the 
wage-setting system in order to prevent any future decoupling between nominal wage 
evolutions and productivity developments. 

•  Labour market: At 67.2%, Belgium's employment rate stands below the EU average 
and  has  stagnated  since  2009.  Although  reforms  have  been  undertaken  to  boost 
employment, high wage costs continue to hamper job creation and the high tax burden 
creates  disincentives  to  work  as  there  has  been  no  substantial  shift  in  taxation  away 
from labour. The efforts to increase the effectiveness of active labour market policies 
and  the  coherence  between  on  the  one  hand  education  and  training  and  on  the  other 
hand  employment  policies  could  be  complemented  by  additional  measures  to  reduce 
skills mismatches and enhance labour mobility. 

•  Product markets: Prices for energy and other goods and services are generally higher 
in  Belgium  than  in  other  Member  States,  reflecting  weak  competition  and  structural 
barriers.  Mobile  broadband  penetration  is  amongst  the  lowest  in  the  EU  and  mobile 
phone  costs  are  still  above  levels  in  other  countries.  Regarding  the  energy  markets, 
ensuring  effective  competition  continues  to  represent  an  important  challenge,  while 
domestic  production  capacity  risks  falling  to  a  level  that  would  jeopardise  a  robust 
security of supply. 

•  Climate  and  energy:  Belgium  appears  to  be  falling  short  of  its  2020  target  for 
reducing  greenhouse  gas  emissions.  According  to  projections,  Belgium  anticipates  it 
will miss its 2020 emission reduction target by 11 pps. Coordination and effort-sharing 
among the various authorities involved is currently lacking. 

4 

 
 
1.  INTRODUCTION 

In  May  2012,  the  Commission  proposed  a  set  of  country-specific  recommendations  (CSRs) 
for  economic  and  structural  reform  policies  for  Belgium.  On  the  basis  of  these 
recommendations, the Council of the European Union adopted seven CSRs in the form of a 
Council Recommendation in July 2012. These CSRs concerned public finances, the pension 
system,  the  financial  sector,  the  labour  market  and  wage  setting,  product  markets  and 
greenhouse  gas  reductions.  This  Staff  Working  Document  (SWD)  assesses  the  state  of  the 
implementation of these recommendations in Belgium. 

The  SWD  assesses  policy  measures  in  light  of  the  findings  of  the  Commission's  Annual 
Growth Survey 2013 (AGS)1 and the second annual Alert Mechanism Report (AMR),2 which 
were  published  in  November  2012.  The  AGS  sets  out  the  Commission's  proposals  for 
building the necessary common understanding about the priorities for action at national and 
EU  level  in  2013.  It  identifies  five  priorities  to  guide  Member  States  to  renewed  growth: 
pursuing differentiated, growth-friendly fiscal consolidation; restoring normal lending to the 
economy;  promoting  growth  and  competitiveness  for  today  and  tomorrow;  tackling 
unemployment  and  the  social  consequences  of  the  crisis;  and  modernising  public 
administration.  The  AMR  serves  as  an  initial  screening  device  to  determine  whether 
macroeconomic  imbalances  exist  or  risk  emerging  in  Member  States.  The  AMR  found 
positive signs that macroeconomic imbalances in Europe are being corrected. To ensure that a 
complete  and  durable  rebalancing  is  achieved,  Belgium  and  13  other  Member  States  were 
selected for a review of developments in the accumulation and unwinding of imbalances.3 

Against  the  background  of  the  2012  Council  Recommendation,  the  AGS  and  the  AMR, 
Belgium  presented  updates  of  its  National  Reform  Programme  (NRP)  and  its  Stability 
Programme  on  29  April  2013.  These  programmes  provide  detailed  information  on  progress 
made since July 2012 and on the future plans of the government. The information contained 
in  these  programmes  provides  the  basis  for  the  assessment  made  in  this  Staff  Working 
Document.  The  programmes  submitted  went  through  an  inclusive  consultation  process 
involving regional and community authorities as well as social partners and civil society.4  

Overall assessment 

The analysis in this SWD concludes that Belgium has made some progress on measures taken 
to  address  the  CSRs  in  the  2012  Council  Recommendation.  Steps  taken  go  in  the  right 
direction, but need to be complemented by further action. As a consequence, the challenges in 
2013 remain broadly similar to those of 2012. 

First, the long-term sustainability of public finances is still at risk. Belgium made only limited 
progress in implementing the Council’s 2012 recommendation on public finances. It failed to 
bring  the  deficit  below  3 %  of  GDP  by  2012  as  agreed  in  the  Excessive  Deficit  Procedure 
(EDP).  Belgium  fully  applied  the  recommendation  relating  to  the  banking  sector  by 
recapitalising  Dexia  at  the  end  of  2012,  which  had  a  one-off  negative  impact  on  the  2012 

1 COM(2012) 750 final. 
2 COM(2012) 751 final. 
3  13  in-depth  reviews  were  published  on  10  April  2013.  While  selected  for  an  in-depth  review  in  the  AMR, 
Cyprus  was  ultimately  not  reviewed  under  the  Macroeconomic  Imbalance  Procedure  in  view  of  the  advanced 
preparations for a financial assistance programme. 
4  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 federal government held consultations 
with social partners on Europe 2020 matters prior to adoption of the NRP. 

5 

 
 
deficit outcome. However, even without this operation, the 2012 deadline for correction of the 
excessive deficit would have been missed. Additionally, some of the measures to reduce the 
deficit were not structural in nature and the correction is not yet sustainable, as the deficit is 
projected  to  rise  again  from  2014  onwards.  Belgium  made  some  progress  on  the 
recommendation  to  improve  the  long-term  sustainability  of  its  public  finances.  It  initiated  a 
pension and pre-retirement reform with the aim of keeping older workers in the labour market 
but  did  not  take  measures  to  link  the  statutory  retirement  age  to  life  expectancy  in  order  to 
safeguard the sustainability of public finances over the long term. 

Second, to restore cost-competitiveness and boost job creation, measures were taken to curb 
inflationary  pressures  on  wages,  though  without  reforming  the  practice  of  automatic  wage 
indexation. In addition, the government took initiatives to overcome the accumulated relative 
wage gap vis-à-vis the main trading partners. These initiatives comprise a real wage freeze for 
the  period  2013-14,  reinforced  structural  reductions  of  employer's  social  security 
contributions  and  a  revision  of  the  1996  law  on  competitiveness  and  collective  wage 
bargaining. However, as discussion of the legislative proposal is ongoing, it remains unclear 
whether  the  planned  revision  will  be  truly  structural  in  nature.  Overall,  progress  on  the 
recommendation in question remains therefore limited for the time being. Given the persisting 
challenges  Belgium  faces  in  this  area,  a  decisive  reform  is  called  for,  including  not  just 
remedial measures to address past hikes in unit labour costs but a thorough modernisation of 
the  wage-setting  system  in  order  to  prevent  any  future  decoupling  between  nominal  wage 
evolutions and productivity developments. 

Third, while reforms have been  implemented  to  address  shortcomings  of  the  labour  market, 
there has been no major overhaul of the Belgian tax system. The government has taken steps 
to  reduce  the  tax  burden  for  specific  categories  of  workers,  sectors  and  types  of  firms  by 
means of a targeted approach to decrease social security contributions for employers. Despite 
these efforts, Belgium has the highest implicit tax rate on labour in the EU-27, hampering job 
creation and creating disincentives to take up work. Also, the interplay between the measures 
taken by the federal authorities and the various employment support schemes implemented at 
the  regional  levels  generates  considerable  complexity  and  potential  dead-weight  losses. 
Belgium  has  achieved  some  progress  in  addressing  the  Council  Recommendation  on  these 
issues,  by  reforming  its  unemployment  benefit  system  and  gradually  extending  activation 
efforts  to  older  workers.  Since  the  number  of registered  job  seekers  is  increasing,  it  will  be 
crucial to ensure close follow-up and effective enforcement of job search requirements as well 
as appropriate job search support in all regions. In order to increase labour force mobility and 
to address skills shortages and mismatches, more effective coordination between the different 
regional  actors,  more  efficiency  and  better  outcomes  in  terms  of  skills  and  relevance  of  the 
education systems including  through continuing training will also be essential. A reinforced 
coherence between education, employment policies and actors is also needed. 

Fourth,  there  has  been  limited  progress  on  addressing  operational  restrictions  and 
strengthening  competition  in  retail  and  network  industries.  Retail  prices  continue  to  be 
considerably  higher  than  in  other  countries,  reflecting  not  only  structural  aspects  but  also 
competitive restrictions. As regards electronic communications, mobile broadband penetration 
remains hampered by administrative restrictions, while prices for mobile telephony have been 
more  responsive  of  late  but  remain  well  above  levels  in  other  countries.  As  to  the  energy 
markets, effective competition at retail level for electricity and gas and at wholesale level for 
electricity continues to be an important challenge. 

Finally, there has not been sufficient progress in reducing greenhouse gas emissions towards 
the Europe 2020 target. According to projections, Belgium will miss its reduction target by a 
wide margin. This may stem from the general lack of coordination and effort-sharing among 
the various authorities involved in reaching the national target. 

6 

 
The policy plans submitted by Belgium address most of the challenges identified in last year's 
Staff  Working  Document,  and  broad  coherence  between  the  two  programmes  has  been 
ensured.  The  national  reform  programme  confirms  Belgium's  commitment  to  addressing 
shortcomings in the areas of long-term sustainability of public finances, competitiveness, the 
labour  market,  competition  and  the  environment.  The  stability  programme  demonstrates 
Belgium's  commitment  to  improving  the  budgetary  position  towards  the  medium-term 
objective in line with the Stability and Growth Pact. Sometimes, however, planned measures 
do not address the challenges in a comprehensive way. In order to ensure that national 2020 
targets and budgetary targets are reached, consistency between regional and national targets 
and coordination among regional actors are essential. 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

Weak economic performance across the euro area and the sovereign debt crisis have had 
serious  repercussions  for  growth  and  employment  in  the  open  Belgian  economy.  As  a 
result  of  persistent  uncertainty,  domestic  demand  has  been  subdued  in  recent  quarters  with 
GDP  contracting  by  0.3%  in  2012,  as  compared  with  -0.6%  for  the  euro  area.  A  robust 
contribution  by  net  exports  could  not  prevent  the  Belgian  economy  from  shifting  into 
recession as household spending and investment both fell by 0.6%. 

Private  consumption  has  fallen  almost  continuously  since  the  beginning  of  2011,  with 
2012 marking the first time in many years that private consumption shrank over the full 
year. It also contrasted with the 2009 recession, when private spending proved resilient. Real 
disposable  income  shrank  both  in  2011  and  2012.  Also  the  general  economic  climate  and 
announcements of big lay-offs has been exerting a downward drag on consumer confidence. 
Given these announcements and the sluggish performance by the domestic economy, it is no 
surprise that unemployment has risen to 7.6% in 2012 as compared with 7.2% in 2011. 

Overall inflation slowed down in 2012, reaching 2.6% for the year, which corresponds to 
the EU average. While this reflected mainly the freeze of energy prices between the second 
and  final  quarters,  the  general  weakness  observed  across  all  economic  sectors  also  plays  a 
role. In the first few months of 2013, inflation has been continuing its downward trend, falling 
below levels observed in neighbouring countries. 

Economic outlook  

According to the Commission's 2013 Spring Forecast (hereafter 'Spring Forecast'), real 
GDP  will  remain  flat  in  2013,  with  domestic  demand  continuing  the  contraction  that 
started  in  2012.  While  it  is  assumed  that  household  consumption  will  stagnate  with 
confidence indicators near historic lows, investment is expected to drop further, driven by an 
economy-wide  lack  of  confidence,  a  depressed  construction  sector,  tightening  credit 
conditions and an industry featuring ample spare capacity.  

It is anticipated that both private consumption and investment will gain pace only as of 
2014 when domestic demand becomes the main driver behind a real GDP growth rate of 
1.2%.  In  the  slipstream  of  this  more  dynamic  domestic  demand,  it  is  assumed  that  import 
growth will catch up with export growth. This would limit further gains from net exports in 
2014, whereas in 2013 positive net foreign demand growth would prevent the headline GDP 
from contracting as the open Belgian economy is expected to take advantage of an upturn in 
world trade. 

7 

 
 
Falling international energy prices and government measures to enhance competition on 
the  domestic  retail  market  for  energy  are  projected  to  result  in  a  further  noticeable 
slow-down in inflationary pressures. Consumer prices are expected to increase by 1.3% in 
2013 and 1.6% in 2014, as compared with 2.6% in 2012.  

With  regard  to  the  labour  market,  the  trend  of  gradually  rising  unemployment  is 
expected to continue during 2013, touching 8.0% on average. This level is also forecast for 
2014, as job creation fails to outpace labour force growth.  

The  macroeconomic  assumptions  in  Belgium's  2013  National  Reform  Programme  and 
Stability  Programme  broadly  follow  the  latest  forecast  figures  of  the  Commission 
services.  For  2013  and  2014,  real  GDP  growth  of  0.2%  and  1.5%  respectively  is  assumed. 
This  is  slightly  more  optimistic  than  the  Commission's  0.0%  and  1.2%,  but  still  within  a 
reasonable margin.5 The Stability Programme does not take into account the potential impact 
on growth of the planned fiscal consolidation. The National Reform Programme presents two 
sets  of  CSR-related  scenarios  for  which  a  qualitative  impact  assessment  is  executed.6    The 
first  set  deals  with  adopted  measures  to  increase  labour-cost  competitiveness.  The  scenario 
assumes  a  modest  1.43%  decrease  in  nominal  hourly  labour  cost  by  2020  which  increases 
employment  by  0.5%  and  GDP  by  a  about  0.2%.  The  second  set  contains  selected 
administrative measures to reduce energy prices and interventions to modify the calculation of 
the  national  price  index.  According  to  the  estimation,  they  sort  very  modest  GDP  effects, 
which seems reasonable given the small size of the sector.7  

2.2. 

Challenges 

Belgium  faces  important  and  interrelated  challenges  as  regards  the  state  and 
sustainability  of  its  public  finances,  deteriorating  external  competitiveness,  the 
functioning  of  the  labour  and  product  markets,  and  greenhouse  gas  emissions.  The 
challenges presented here are all linked to the growth priorities identified in the 2013 Annual 
Growth Survey and some are also identified in the second in-depth review (IDR) on Belgium, 
the findings of which are highlighted in Box 1. 

Belgium’s  public  debt  is  expected  to  rise  above  100 %  of  GDP  in  2013  and  broadly 
stabilise in 2014. Despite considerable consolidation efforts, the correction of the excessive 
deficit  is  not  yet  sustainable.  Apart  from  the  scale  of  the  required  consolidation,  the  effort 
sharing  between  the  different  tiers  of  government  represents  an  additional  challenge. 
Once the 6th reform of the state has been implemented, regions and communities will enjoy 
increased tax autonomy, while debt servicing and ageing costs continue to be borne to a large 
extent at federal level. 

The financial sustainability of the old-age social security system, especially with regard 
to  pensions  and  long-term  care,  remains  a  key  challenge  given  the  low  employment  rate 
among the elderly and the rising costs of population ageing. Moreover, since a comparatively 
high  proportion  of  the  Belgian  elderly  is  at  risk  of  income  poverty,  the  need  to  achieve 

5  The  figures  used  by  the  Belgian  authorities  correspond  to  projections  in  the  Commission's  Winter  Forecast, 
which were, at the moment the NRP was submitted, the latest available Commission data. 
6 NRP, Annex II, pp. 48-49. Assessment has been performed making use of HERMES macroeconometric model. 
7  Also,  the  effect  of  increased  competition  in  the  energy  sector  was  not  taken  into  account  for  the  simulation 
Although,  the  simulated  macroeconomic  effects  are  small  this  is  (admittedly)  due  to  the  limited  scope  of  the 
reforms which were taken into account (e.g. no additional competitiveness effects were assumed in the utilities 
sectors). 

8 

 
 
 
financial sustainability should be carefully balanced with the need to maintain the adequacy of 
old-age social security schemes. The residual tax space to address the debt burden is narrow 
given  that  the  tax-to-GDP  ratio  in  Belgium  reached  44.1 %  of  GDP  in  2011  —  the  third 
highest in the EU. Despite the reinforced targeted and structural reductions of social security 
contributions, Belgium still imposes heavy taxes on labour. 

Observed  losses  in  export  market  shares  can  be  partially  attributed  to  a  loss  of  cost 
competitiveness  induced  by  the  wage-setting  system  and  inefficient  product  markets. 
Given  that  Belgium  is  specialised  in  intermediate  products,  for  which  international 
competition is fierce, unit labour costs (ULCs) need to be closely monitored. However, ULCs 
have  risen  more  rapidly  in  Belgium  than  in  neighbouring  and  competing  countries  over  the 
past decade, especially since 2005. In this respect, the wage norm of 1996, meant to preserve 
competitiveness  vis-à-vis  the  main  trading  partners,  has  not  always  fulfilled  its  role. 
Additionally, prices for energy and many other goods and services are higher in Belgium than 
in other Member States, reflecting weak competition and structural barriers. 

to  some  extent  counter-balanced  and  mitigated 

Other factors which explain the observed losses in export market shares are related to 
non-cost  competitiveness  issues.  The  strengths  of  the  Belgian  research  and  innovation 
system  have 
the  country’s  cost-
competitiveness  issue.  Indeed,  very  good  trade  performances  in  a  limited  number  of 
innovative  and  knowledge-intensive  sectors  have  boosted  the  contribution  of  high-tech  and 
medium-tech products to the trade balance since 2004. As business research and development 
(R&D)  is  still  very  concentrated  in  a  few  sectors  and  firms,  Belgium  would  benefit  from 
broadening its innovation base and speeding up the renewal of its economic fabric. Despite a 
high  rate  of  tertiary  graduates,  the  country’s  weaknesses  in  terms  of  availability  of  skilled 
professionals, entrepreneurship and firms’ dynamics may impede this renewal. 

Belgium  suffers  from  below-average  and  stagnating  labour  market  participation  and 
high  employment/unemployment  disparities  across  regions  and  population  subgroups. 
Both issues have a number of drivers, such as the erosion of cost-competitiveness, high labour 
taxation, still low overall innovation capacity and low job creation potential in certain areas 
where  the  predominant  industrial  mix  is  in  decline,  limited  labour  mobility,  persisting 
educational,  geographical  and  skills  mismatches  and  ineffective  activation  policies.  Among 
the  population  subgroups  participating  least  in  the  labour  market  are  people  with  a  migrant 
background, 
in  all  regions.  Overall  youth 
low-skilled  youngsters 
unemployment is also high in Wallonia and the Brussels Capital Region and in specific urban 
areas in Flanders. Generally speaking, Belgium’s education systems perform  better than  the 
EU average, although results vary between communities.8 Overall performance is marred by 
poor  educational  achievements  in  vocational  education  and  training,  a  rising  share  of  early 
school leavers, strong differences between nationals and pupils with migrant background, low 
participation in adult learning9 - in particular among older workers - and varying degrees of 
school autonomy in the different education networks. 

the  elderly  and 

Poverty  and  social  exclusion  risk  indicators  also  point  to  a  number  of  persisting 
challenges.  For  instance,  Belgium  records  an  above-average  and  rising  share  of  low  work 

8 Belgium still outperforms the EU average in terms of early school leaving (ESL), despite the fact that it is one 
of  the  few  countries  faced  with  an  increase  of  the  ESL  rate  between  2009  and  2012  (from  11.1 %  to  12.0 %). 
Belgium’s tertiary attainment rate is significantly above the EU average. In terms of basic skills attainment, 15-
year-olds’ performance on 2009 PISA tests is better than the EU average in reading and mathematics and very 
close to it for science. Participation in early childhood education is among the highest in the EU. 
9 Learning participation rate of adults in Belgium in 2011: 7.1 %; older workers: 3.9 %; low-skilled: 3.1 %. 

9 

 
 
intensity households, elderly people are more exposed to income poverty risk and people with 
a  migrant  background  are  markedly  more  exposed  to  the  risk  of  social  exclusion  than 
elsewhere in Europe.   

Lastly, as regards climate and energy, the picture is mixed. Belgium has been progressing 
at  a  slow  but  stable  pace  on  the  proportion  of  renewable  energy  in  energy  consumption. 
Nevertheless,  according  to  the  latest  national  projections  submitted  to  the  Commission,  the 
15 % reduction target for greenhouse gas emissions in the non-ETS10 sectors will not be met: 
Belgium's  most  recent  projections  anticipate  a  decrease  of  4%  by  2020  as  compared  with 
2005, representing a shortfall of 11 pps against the target. 

Box 1: Summary of the 2013 in-depth review (IDR) under the Macroeconomic Imbalance 
Procedure 

The  second  IDR  on  Belgium  found  that  the  country  continues  to  suffer  from  export  market  share 
losses  as  a  consequence  of  declining  shares  in  goods  exports.  This  weakening  export  performance 
reflects  an  increasing  specialisation  in  cost-sensitive,  intermediate  products  and  ULCs  rising  faster 
than  in  trading  partner  countries.  While  the  authorities  have  announced  measures  to  reduce  the 
widening  wage  gap,  this  correction  will  materialise  only  gradually  and  additional  measures  may  be 
needed  to  close  the  historic  gap  entirely  with  several  trading  partners  also  implementing  relevant 
labour market reforms. 

More  specifically,  the  ‘wage  norm’  would  benefit  from  modernisation  through,  for  example,  the 
inclusion of productivity growth differentials in the benchmark, the automatic application of ex-post 
corrections,  and  all-in  agreements.  This  would  help  align  wage  developments  more  closely  with 
productivity  dynamics,  allow  more  wage  diversification  between  sectors  and  push  back  structural 
labour mismatches. With regard to the automatic wage indexation system, introducing more flexibility 
in  its  application  would  help  the  very  open  Belgian  economy  to  absorb  external  shocks  more 
smoothly. Competitiveness could also be enhanced by a further shift in the tax burden from labour to 
other sources of revenue and a continued effort to improve the functioning of network industries. 

Belgium  will also have to foster total factor productivity, as gains to be expected from already high 
labour productivity are limited. For this to happen, it is vital to speed up the transition towards a more 
knowledge-intensive  economy,  enabling  the  full  exploitation  of  research  activities.  While  the  broad 
thrust of research and innovation polices in recent years has been appropriate – exports with a high-
tech  content  have  been  on  an  upward  trend  –  efforts  need  to  be  stepped  up.  In  particular,  further 
development  of  the  support  to  clusters  and  better  conditions  for  the  growth  of  innovative  firms  are 
required. 

The high level of public debt continues to represent an imbalance in view of sustainability concerns as 
it makes Belgium vulnerable to tensions in financial markets that could result in an upward debt spiral. 
A large proportion of Belgian debt is held domestically, which may reduce external vulnerabilities but 
reinforces  risks  for  spillovers  between  the  public  sector,  the  banking  sector  and  the  real  economy. 
Sizeable  contingent  liabilities  to  the  financial  sector  constitute  an  additional  risk.  Moreover,  the 
remaining fiscal space to address the debt burden is very limited, while the fiscal sustainability risk is 
high  in  the  medium  to  long  term  due  to  the  budgetary  impact  of  ageing.  As  a  consequence,  the 
economy as a whole would benefit from a sustained consolidation of public finances. 

Although  there  is  a  high  degree  of  intra-group  loans,  fostered  by  advantageous  tax  schemes,  in 
consolidated  terms  the  indebtedness  of  non-financial  corporations  does  not  point  to  emerging  risks. 
Household  indebtedness  is  mostly  mortgage-related.  The  IDR  concludes,  however,  that  a  possible 

10 In Belgium only 38 % of emissions come from sectors included in the EU Emission Trading Scheme (ETS). 
Of  the  more  important  non-ETS  sectors  road  transport  (22.5%)  and  residential  and  commercial  energy  use 
(18.5%) are the largest sources of non-ETS GHG emissions in the country. 

10 

 
 
downward correction of housing prices would most likely have only limited effects on consumption 
and on the construction and financial sectors. 

3.  ASSESSMENT OF POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The objective of the budgetary strategy outlined in the 2013 Stability Programme is to 
reach a balanced budget in structural terms by 2015 and to achieve the MTO the year 
after, one year later than  the  target year set in last year's programme. The  programme 
has changed the MTO from a surplus of 0.5% to 0.75% of GDP. The new MTO reflects the 
objectives of the Stability and Growth Pact. 

The 2012 deficit came out at 3.9% of GDP, as compared with a target of 2.8% of GDP in 
the 2012 programme. The recapitalisation of Dexia bank at the end of 2012 had a negative 
impact of 0.8% of GDP on the outcome. Lower-than-expected GDP growth and slippages at 
the level of local government also contributed to the shortfall. 

This  year's  programme  sets  deficit  targets  in  structural  terms.  The  macro-economic 
scenario of the programme would result in a reduction of the nominal deficit to 2.5% of GDP 
in  2013,  as  compared  with  2.15%  of  GDP  in  last  year's  programme.  The  Spring  Forecast 
projects a deficit of 2.9% of GDP in 2013. This is due partly to the different macro-economic 
assumptions,  and  partly  to  a  different  assessment  of  the  impact  of  some  measures  and 
expected shortfalls at local level. 

For 2014, the programme projects a deficit of 2.0% of GDP, as compared with 1.1% in 
the 2012 programme. This revision is partly due to the negative base-effect and lower GDP 
growth,  but  also  in  structural  terms  the  improvement  is  smaller  than  predicted  in  last  year's 
programme.  Under  the  no-policy-change  assumption  of  the  Spring  Forecast,  the  deficit  is 
expected to rise again above the reference value of 3% of GDP in 2014, to 3.1%. 

While  last  year's  programme  projected  a  return  to  a  balanced  budget  in  2015,  this  is 
now not projected until 2016. Under the growth assumptions of the programme, the nominal 
deficit will come out at -0.5% of GDP in 2015. 

Partially  due  to  the  low  growth  outlook  for the  short  term,  the  adjustment  in  nominal 
terms is rather back-loaded. In addition, contrary to last year's programme, the adjustment 
in  structural  terms  is  also  somewhat  back-loaded  due  to  unambitious  improvement  in  the 
(recalculated)  structural  balance11  projected  for  2014.  No  consolidation  measures  have  been 
specified  beyond  2013.  According  to  the  indicative  distribution  in  the  programme,  the 
adjustment strategy between 2012 and 2016 will be balanced between revenue increases and 
expenditure  restraint  (excluding  the  impact  of  Dexia  in  2012).  In  2013,  one-offs  should 
contribute an estimated 0.3% of the nominal improvement. 

11 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 and using the commonly agreed methodology. 

11 

 
 
Box 2: Main measures 

According  to  the  programme,  the  federal  government  took  around  EUR  3.8  bn  (1%  of  GDP)  of 
discretionary  measures  in  the  2013  budget.  On  the  expenditure  side,  the  government  reduced  both 
central government expenditure and social security expenditure by 0.2% of GDP (of which 0.1% in the 
healthcare system) as compared with an unchanged policy scenario. New tax measures accounted for 
around 0.3% of GDP, while other measures (mainly non-tax revenues) accounted for another 0.3%. In 
March 2013, the government agreed on a series of additional measures with an impact of around 0.1% 
of  GDP  on  revenue  and  0.1%  expenditure  in  order  to  ensure  a  1%  of  GDP  improvement  in  the 
structural balance. 

  Main budgetary measures 

  Revenue 

Expenditure 

2013 

•  Reduction 

in 

central 

government 
expenditure  (-0.2%  of  GDP):  inter  alia  on 
development 
diplomacy, 
cooperation, 
defence, functioning costs, and transfers to 
the national railway company 

•  Reduction in healthcare expenditure (-0.1% 

of GDP) 

•  Other  social  security  measures  (-0.1%  of 

GDP) 

•  Increase 

in 

the 

financial 

income 

withholding tax (0.1% of GDP) 

•  Change in the reference rate of the notional 
interest  deduction  in  corporate  income 
taxation (0.1% of GDP) 

•  Increase  in  several  indirect  taxes  (0.1%  of 
tobacco  and 
GDP):  excise  duties  on 
alcohol,  tax  on  premiums  of  life  insurance 
contracts 

•  Fiscal  amnesty  and  anti-fraud  measures 

(0.2% of GDP) 

•  Sale  of  telecom  licenses  and  emission 

permits (0.1% of GDP) 

•  Reduction  in  social  security  contributions 

(-0.1% 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  indicates  that  revenue/expenditure  increases  as  a 
consequence of the measure.  

In  the  context  of  the  2013  budget,  the  government  also  introduced  measures  to  restrain  wage  costs 
with a view to closing the accumulated wage gap vis-à-vis Belgium's neighbours. A real wage freeze 
was  enacted  for  the  period  2013-14,  while  at  the  same  time  the  inflation  measurement  for  wage 
indexation purposes has been altered. Also, the government has earmarked an annual budget of EUR 
400 mn (0.1% of GDP) for additional reductions in social security contributions. Finally, a reform of 
the 1996 law on the so-called 'wage norm' has been announced. The effectiveness of these measures 
remains to be seen, as some of them are still to be fleshed out and translated into legislation, while the 
relative impact of measures such as the wage freeze will be contingent on developments in Belgium’s 
main  trading  partners.  In  the  context  of  the  reform  of  the  unemployment  benefit  system  initiated  in 
2012, the rate at which benefits are reduced over time has been increased since November 2012. 

The  programme  projects  a  balanced  consolidated  budget  at  Entity  II  level  (regions, 
communities and local authorities) in 2013. Beyond 2013, the programme does not explain 
how the planned adjustment will be shared among the different layers of government, an issue 
also addressed in last year's CSRs. 

12 

 
 
 
 
 
 
 
 
 
The  absence  of  clear  and  transparent  effort  sharing  among  the  different  layers  of 
government poses a substantial risk to the achievement of the consolidated programme 
targets. There are also implementation risks in view of the 2014 elections at both federal and 
regional level. While the programme targets a sizeable adjustment in 2015, a long period of 
political uncertainty after the elections as observed in 2007 and 2010 would put this target at 
risk.  Lastly,  given  that  targets  are  set  in  structural  terms,  the return  to  a  balanced  budget  in 
nominal terms by 2016 may be delayed if growth turns out lower than currently expected. On 
the other hand, the nominal deficit outcome may also be better than currently projected if the 
economy recovers faster than currently anticipated, particularly if the authorities do not offset 
the positive cyclical effect on the nominal balance by a relaxation of the structural effort. 

The programme anticipates correction of the excessive deficit by 2013, one year after the 
deadline recommended by the Council in 2009. However, according to the Spring Forecast, 
the safety margin against breaching the Treaty reference value is narrow. 

Box 3. Excessive deficit procedure for Belgium 

On 2 December 2009, the Council decided that an excessive deficit existed in Belgium and adopted 
the  most  recent  Council  Recommendation  under  Art.  126(7)  TFEU.  The  Council  recommended  that 
the  Belgian  authorities  should  put  an  end  to  the  present  excessive  deficit  situation  by  2012. 
Specifically,  in  order  to  bring  the  general  government  deficit  below  3%  of  GDP  in  a  credible  and 
sustainable manner, 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 planned fiscal effort in 
2011 and 2012; (b) ensure an average annual fiscal effort of ¾% of GDP over the period 2010-2012, 
which should also contribute to bringing the gross debt ratio back on a declining path that approaches 
the  reference  value  at  a  satisfactory  pace  by  restoring  an  adequate  level  of  the  primary  surplus;  (c) 
specify  the  measures  that  are  necessary  to  achieve  the  correction  of  the  excessive  deficit  by  2012, 
cyclical conditions permitting, and to accelerate the reduction of the deficit if economic or budgetary 
conditions turned out better than expected at the time the EDP recommendations were issued; and (d) 
strengthen  the  monitoring  mechanisms  to  ensure  that  fiscal  targets  are  respected.  In  addition,  the 
Belgian authorities were recommended to seize opportunities beyond the fiscal effort, including from 
better  economic  conditions,  to  accelerate  the  reduction  of  the  gross  debt  ratio  back  towards  the 
reference value. Finally, the Council invited the Belgian authorities to implement reforms with a view 
to  raising  potential  GDP  growth,  including  reforms  conducive  to  enhancing  the  quality  of  public 
finances, in particular the introduction of enforceable, multi-annual expenditure ceilings and budgetary 
agreements among the different government tiers. 

the 

An  overview  of  the  current  state  of  excessive  deficit  procedures,  including  additional  steps  adopted 
after 
on: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/index_en.htm  (please  refer  to 
country sections at the bottom of the page). 

Staff  Working  Document, 

finalisation 

available 

this 

of 

is 

For the years after the correction of the excessive deficit, the planned annual progress 
towards the MTO is higher than the minimum requirement of 0.5% of GDP and in line 
with  the  calendar  for  convergence.  However,  the  planned  (recalculated)  effort  in  2014  of 
0.5%  (0.6%  according  to  the  programme)  lacks  ambition,  thus  making  the  remaining  effort 
that needs to be made in 2015 in order to reach a balanced budget in structural terms rather 
challenging.  According  to  the  information  provided  in  the  programme,  the  growth  rate  of 
government  expenditure,  net  of  discretionary  revenue  measures,  in  2014-16  is  expected  to 
contribute to an annual structural adjustment towards the MTO by 0.5% of GDP. Following 
an overall assessment of the Member State’s budgetary plans, with the structural balance as a 
reference,  including  an  analysis  of  expenditure  net  of  discretionary  revenue  measures,  the 
adjustment  path  towards  the  MTO  seems  to  be  appropriate.  However,  the  credibility  and 
commitment of the budgetary strategy would be enhanced by a more balanced distribution of 
the effort between 2014 and 2015. 

13 

 
According  to  the  programme,  the  debt  ratio  will  peak  at  100.0%  of  GDP  in  2013  and 
will decline gradually to 93.0% of GDP by 2016. Given the low growth, the planned deficit 
reduction  in  2013  is  not  enough  to  prevent  the  debt  from  rising  above  100%  of  GDP. 
Therefore,  the  authorities  commit  themselves  in  their  programme  to  taking  additional 
measures  by  the  end  of  June  2013  to  curb  the  rise  in  the  debt  level.  In  this  context,  the 
government has already announced the sale of Royal Park Investments, the remnants bank of 
the former Fortis Bank. According to the programme, the reduction of the nominal deficit will 
put  the  debt  level  on  a  downward  path  from  2014  onwards  (see  Graph  below  Table  V  in 
annex), in contrast to the rise projected under the no-policy-change assumption of the Spring 
Forecast.  In  2014  and  2015,  Belgium  will  be  in  a  transition  period  and  plans  would  ensure 
sufficient  progress  towards  compliance  with  the  debt  criterion.  According  to  the  plans,  the 
debt benchmark will be met at the end of the transition period. According to the Commission 
2013 Spring Forecast, which projects that the debt ratio will reach 101.4% of GDP in 2013 
and  rise  further  to  102.1%  of  GDP  in  2014  under  a  no-policy-change  assumption,  the 
transition  towards  the  debt  reduction  rule  will  not  be  respected  in  2014.  As  compared  with 
2012,  contingent  liabilities  linked  to  guarantees  provided  to  the  financial  sector  have 
decreased  by  more  than  2pps  of  GDP,  but  remain  substantial  (at  around  13.5%  of  GDP 
according to the programme).  

Long-term sustainability 

Belgium  does  not  appear  to  face  a  risk  of  fiscal  stress  in  the  short  term.  Nonetheless, 
there are some indications that the fiscal side of the economy poses potential risks. Fiscal 
sustainability  risks  are  high  in  a  medium-  to  long-term  perspective,  influenced  by  the 
budgetary impact of the cost of ageing, which derives from a rapidly ageing population 
and  a  high  level  of  expenditure  on  social  transfers.  Indeed,  government  debt  (99.6%  of 
GDP  in  2012  and  expected  to  rise  to  102.1%  in  2014)  is  above  the  60%  of  GDP  Treaty 
threshold. Risks would be lower in the event of the structural primary balance reverting to the 
higher values observed in the past, such as the average for the period 1998-2012. The focus 
should,  therefore,  be  on  resolutely  continuing  to  implement  sustainability-enhancing 
measures.  In  addition,  government  debt  needs  to  be  reduced.  Further  containing  age-related 
expenditure growth, including through pension reform, appears necessary to contribute to the 
sustainability of public finances in the medium and long term. 

For Belgium, the 2012 Ageing Report shows a very significant projected increase (+2.0 
pps)  in  total  age-related  public  expenditure  as  a  proportion  of  GDP  already  over  the 
years 2010-20. In particular, public pension expenditure is projected to increase by 1.6 pps of 
GDP (one of the largest increases in the EU),12 due to a rapidly ageing population and a high 
level of expenditure on social transfers, in spite of relatively low individual pensions. 

The  Commission  services  consider  that  Belgium  has  made  some  progress  on  measures 
taken  to  address  the  CSR.  In  2012,  Belgium  implemented  the  2011  pension  reform 
designed  to  boost  older  workers’  labour  market  participation  and  to  curb  age-related 
expenditure  (see  section  3.3).  In  particular,  the  reform  tightens  eligibility  requirements  for 
early retirement and gradually rolls back early exit or pre-retirement systems; it extends the 
reference  period  for  the  calculation  of  benefits,  and  reduces  pension  rights  accrued  during 
periods of inactivity. 

12 The latest pension reform has been taken into account in the projections. Total age-related public expenditure 
was updated accordingly after the publication of the 2012 Ageing Report. 

14 

 
 
 
Although  these  reforms  represent  a  step  in  the  right  direction,  given  the  magnitude  of 
the challenge Belgium faces, they are insufficient to secure the long-term sustainability 
of public finances and to reach the elderly employment target Belgium has set for itself. 
Further  reforms  in  this  area  are  warranted  to  reach  these  twin  goals.  In  the  short  term,  it  is 
crucial for Belgium to close the gap between the statutory retirement age and the effective exit 
age  from  the  labour  market  by  rapidly  phasing  out  pre-retirement  and  other  early  exit 
schemes, while preventing shifts to disability or long-term sickness schemes. To be effective, 
such social security reforms need to be underpinned by labour market reforms conducive to 
active  ageing  and  employment  support  for  elderly.  In  addition,  the  long-term  financial 
sustainability  of  old-age  social  security  would  benefit  greatly  from  measures  linking  the 
statutory retirement age to life expectancy. 

Besides reforms directed at the labour market, several steps have been taken in the area 
of  healthcare  and  long-term  care,  such  as  a  more  efficient  use  of  resources  for 
pharmaceutical  products  and  the  development  of  new  and  better  integrated  forms  of 
care. Nevertheless, further efforts will be needed given that fiscal sustainability risks are high 
in  the  medium  to  long  term  for  Belgium  and  long-term  care  is  flagged  as  an  area  that  adds 
considerably to this challenge (see Table V in annex). Public expenditure on long-term care 
(2.3% of GDP in 2010) already surpasses the EU average of 1.8%13, while, according to the 
2012  Ageing  Report,  Belgium  has  relatively  high  expenditure  projections  –  in  both  the 
medium  and  long  term  –  in  the  area  of  public  long-term  care  (+2.7  pps  of  GDP  by  2060 
compared to 1.5 pps for the EU average).14 The high current and projected levels of spending 
are partly due to the focus on relatively costly institutional care.15 A stronger focus on cash 
benefits that also support home care, as against institutional care, could prove more efficient. 
In addition, the eligibility criteria could be more clearly defined. Indeed, Belgium has a very 
high coverage rate and does not apply a means-tested criterion for in-kind benefits, while it 
appears to define the criteria loosely on the basis of dependency.16  

Fiscal framework 

Belgium benefits from the existence of independent fiscal institutions (such as the High 
Council  of  Finance),  but  its  fiscal  rules  and  the  domestic  medium-term  budgetary 
framework  still  appear  to  be  weak,  and  this  has  contributed  to  frequent  slippages  in  the 
past. Belgium has not yet fully transposed the Directive on national budgetary frameworks17 
nor introduced a structural budget balance rule in its legislation, as provided for by the Treaty 
on Stability, Coordination and Governance.18 

13 Public expenditure on in-kind long-term care has increased by 33% between 2003 and 2009 while the share of 
long-term care represents 4.4% of total government expenditure, compared with an EU average of 3.6%. 
14 The 2012 Ageing Report indicates an expected increase of long-term care related expenditure by around 30% 
in  the  medium  term  and  more  than  doubling  by  2060.  Further,  the  projected  expenditure  on  long-term  care 
represents about 30% of the total age-related increase in public spending up to 2060. 
15 In 2010, 10% of the total population and about 100% of the calculated dependent population were covered by 
some  form  of  formal  long-term  care  (see  Ageing  Report  2012).  The  average  cost  of  such  services  per  user, 
calculated in % of GDP per capita, was 102% in institutions and 14% at home, against EU averages of 67% and 
28% respectively (see Ageing Report 2012). 
16 See Mutual Information System on Social Protection (MISSOC), 2012. 
17 The legal deadline for transposition is 31 December 2013. However, Heads of State and Government of euro-
area Member States committed themselves to transposing by end 2012. 
18 Belgium has not yet ratified this Treaty.  

15 

 
 
 
Following  the  political  agreement  of  December  2011  on  institutional  reforms,  regions 
and communities will be granted more responsibilities and greater tax autonomy. In this 
context,  there  is  a  need  for  more  transparent  expenditure  rules  and  the  extension  of 
effective  medium-term  fiscal  planning  to  all  levels  of  government;  up  to  now  this  has 
been done on a rather ad hoc basis. In line with the 2012 recommendation, in addition to a 
rules-based  multi-annual  framework  for  general  government,  it  would  be  helpful  to  design 
and  agree  on  an  internal  stability  pact  to  secure  and  enforce  more  robust,  automatic 
commitments from the regions, communities and local authorities, to meet budgetary targets. 
Finally,  Belgium  suffers  from  vertical  imbalances  in  its  fiscal  decentralisation:  regions  and 
communities do not currently bear the full financial consequences of their policies, e.g. their 
employees’ pensions are paid at federal level. 

Tax system 

The 2012 country-specific recommendations called for a significant tax shift from labour 
to  less  growth-distortive  taxes,  e.g.  environmental  taxes.  The  Commission  services 
consider that Belgium has made only limited progress on measures taken to address the 
CSR.  To  stimulate  hiring,  Belgium  has  taken  targeted  measures  to  further  decrease  social 
security  contributions  for  small  and  medium-sized  enterprises  (SMEs)  and  for  certain 
categories  of  employees,  such  as  the  elderly  and  low-  and  middle-schooled  youngsters.  In 
addition,  the  structural  reduction  of  employers’  social  security  contributions  has  been 
reinforced  as  of  April  2013.  Finally,  to  increase  the  take-home  salary  of  the  low-paid,  the 
‘work  bonus’19  was  strengthened  in  two  steps,  resulting  in  a  net  wage  increase  of 
approximately EUR 250 a year for the lowest wage earners. 

In  parallel,  the  federal  authorities  increased  taxes  on  individuals’  capital  income  and 
took  measures  to  strengthen  the  fight  against  tax  fraud.  As  from  2013,  withholding  tax 
rates on all passive income (interests and dividends) are harmonised (a 25 %20 single rate has 
been adopted and made final). Taxation of private capital gains is almost non-existent (except 
for those on some capitalisation vehicles). At the end of 2012, the government set the end of 
2013  as  a  deadline  for  the  existing  tax  amnesty  scheme,  which  is  expected  to  yield  extra 
revenues  this  year.  At  the  same  time,  penalties  for  tax  fraud  have  been  quadrupled  and  tax 
authorities  have  been  granted  increased  access  to  personal  data.  The  use  of  the  notional 
interest  deductibility  (Allowance  for  Corporate  Equity21)  in  corporate  income  tax  has  been 
further restricted.22 

19  The  ‘work  bonus’  consists  of  a  reduction  of  the  employees’  social  security  contributions  and  of  a  personal 
income tax credit. Both elements were been reinforced as of 1 January 2013. The reduction of employees’ social 
security contributions was increased a second time in April 2013. 
20  Except  on  saving  accounts  and  on  government  bonds  issued  at  the  end  of  2011  for  which  the  rate  is  15 %,    
interest  on  ordinary  saving  accounts  (still  exempted  up  to  EUR  1 830)  and  pension  savings  that  benefit  from 
special arrangements resulting in negative actual rates, as in other EU countries. 
21 The Allowance for Corporate Equity (ACE) was introduced in 2006 to stimulate the self-financing capacity of 
companies  and  safeguard  the  attractiveness  of  Belgium  for  multinationals  after  the  phasing  out  of  the 
coordination centre regime. The tax-free presumptive rate of return on equity applied under the ACE system is 
based on the rate of 10-year government bonds (OLO 10) with a cap of 3 % as of 2012 (3.5 % for SMEs). As 
from 2013, the new rate is based on the average OLO 10 rate for the months of July, August and September of 
the previous year. For 2013, this rate is 2.742 % (3.242 % for SMEs). 
22 The Belgian ACE contains an incentive for a triangular construction, where a subsidiary provides capital to a 
financing  vehicle  of  the  same  group,  which  in  turn  lends  this  capital  to  the  same  or  another  subsidiary.  The 
capital increase in the financing centre allows for a more extensive use of the notional interest deduction by the 

16 

 
 
 
 
However, little has been done to shift the tax burden from labour towards consumption, 
energy  or  immovable  property.  Moreover,  the  tax  system  remains  complex  through 
numerous  tax  expenditures  in  direct  taxation  and  exemptions  and  reduced  rates  in  VAT.  In 
2012,  there  was  a  limited  targeted  VAT  increase  on  digital  TV  and  the  abolition  of  the 
exemption for notaries’ and bailiffs’ services. Mortgage deductibility under personal income 
taxation at federal level is scheduled to disappear as of 2014, as this competence is due to be 
passed to the regions. It is not yet clear whether the regions will introduce similar tax relief. 
Tax  expenditure  cuts  in  personal  income  taxation  include  the  abolition  of  tax  credits  for 
environment-friendly cars and energy-saving investments, which may be replaced only partly 
by  regional  subsidies.  Tax  shifts  are  complicated  by  the  fact  that  some  of  the  taxes  are 
exclusive or shared regional or local competences (e.g. some environmental and immovable 
property  taxes).  Finally,  the  tax  system  still  contains  environmentally  harmful  subsidies 
through  relatively  low  excise  duties  on  diesel  and  heating  fuels  and  through  favourable  tax 
treatment of the private use of company cars. 

3.2. 

Financial sector 

The  restructuring  of  the  Belgian  banking  sector  is  an  ongoing  process.  Total  financial 
assets  of  the  banking  sector  decreased  from  325 %  of  GDP  in  2011  to  288 %  in  2012.  The 
Belgian  banking  sector  is  a  little  ahead  of  other  euro-area  countries  in  the  deleveraging 
process,  because  disinvestment  was  often  a  condition  for  receiving  state  aid.  Market 
concentration has been decreasing, given the difficulties encountered by the four big players 
during the crisis and their subsequent restructuring. Despite substantial deleveraging in 2012, 
credit  supply  to  households  (+4.3 %  year-on-year  increase  in  loan  stock)  and  non-financial 
corporations  (+1.0 %)  were  not  hampered,  although  recording  a  weakening  loan  quality23. 
While exposure to the foreign public and private sector continues to shrink, outstanding loans 
to  Belgian  counterparts  remain  relatively  stable.  This  illustrates  the  downsizing  of  Belgian 
banks to their core market, where they continue to play their intermediary role in the Belgian 
economy.  The  loan-to-deposit  ratio  is  relatively  low.  The  profitability  of  Belgian  banks 
remains  weak,  although  it  improved  in  2012  due  to  higher  net  interest  income  and  lower 
impairments. Overall, risks for the Belgian financial sector seem to have fallen substantially 
since  last  year,  although  the  adjustment  is  still  ongoing.  The  increased  orientation  of  the 
banking  sector  towards  the  home  market,  also  observed  in  other  euro-area  countries,  has 
significantly reduced the sovereign risk. On the other hand, this may cause concentration risk, 
market  fragmentation  and  inefficient  allocation  of  resources,  and  it  reinforces  the 
interdependence and risks of spillovers between the real economy, the public sector and the 
financial sector. 

In  2012,  the  Council  Recommendations  for  Belgium  contained  a  CSR  to  stimulate 
capital increases in the banking sector, so that it could play its normal role in lending to 

financing  vehicle  and  thus  a  reduction  in  income  taxation,  while  the  interest  on  the  internal  loan  paid  by  the 
subsidiary  to  the  financing  centre  also  reduces  the  taxable  income  of  the  subsidiary.  Unlike  the  Italian  ACE, 
however, the Belgian system involves an allowance for existing stock (restricted to seven years as from 2013) 
and  has  no  anti-abuse  measures  to  prevent  companies  from  setting  up  triangular  constructions.  Shares  that 
already  qualify  for  the  participation  exemption  will  no  longer  benefit  from  the  notional  interest  deduction  but 
intra-group loans are not targeted by this recent measure. 
23 The non-performing loan ratio increased from 3.3 % in 2011 to 3.6 % by the end of September 2012. Before 
the financial crisis, it stood at only 1.5 % (National Bank of Belgium). The increase stems predominantly from 
the  corporate  sector,  but  also  non-performing  retail  loans  (households  and  some  small  and  medium-sized 
enterprises) are steadily rising. 

17 

 
 
 
the economy. The Commission services consider that Belgium has fully addressed the CSR. 
KBC increased its capital base through a capital increase and asset divestment. It reimbursed 
ahead of schedule around half of the EUR 7 bn of state aid received and intends to pay back 
another  EUR  1.17  bn  in  the  first  half  of  2013.  The  remaining  outstanding  amount  of  EUR 
2.33 bn will be reimbursed over the 2014-20 period. Dexia was recapitalised by the Belgian 
and French state at the end of 2012 in order to remedy a negative net asset position and allow 
the  orderly  resolution  of  the  group  to  go  ahead.  Additional  recapitalisation  needs  cannot  be 
excluded  since  a  return  to  break-even  point  is  not  expected  before  2018.  Other  large  banks 
have solid solvency ratios. 

According to the European Commission’s 2012 Small Business Act Fact Sheet, Belgium 
is on a par with the EU average in the area of access to finance. Belgian SMEs rely mostly 
on  bank  loans  for  accessing  external  sources  of  finance.  The  latest  European  Central  Bank 
survey (November 2012) on access to finance in  terms of traditional bank lending to SMEs 
seems to suggest two trends: while there has been a strong decline in interest rates charged by 
banks,  rejection  rates  have  increased  in  Belgium,  though  they  are  still  below  the  euro-area 
average. As part of a stimulus strategy adopted by the federal government in July 2012, the 
Belgian  export  credit  agency  (ONDD)  has  recently  created  a  new  financial  instrument 
(‘Export  Funding  Guarantee’)  to  facilitate  export  financing  for  Belgian  firms.  At  regional 
level, several measures have been put in place in order to ease SMEs’ access to finance. 

3.3. 

Labour market, education and social policies 

Belgium’s below-average and stagnating employment rate (67.2 % in 2012 as compared 
with 67.1 % in 2009) and the vast disparities between regions and population subgroups 
can be attributed to a number of factors.24 Despite these large regional differences, labour 
mobility  from  low-  to  high-employment  areas  remains  low.  As  a  consequence,  tight  labour 
markets  and  growth-hampering  skills  shortages  in  certain  areas  coexist  with  persisting  high 
unemployment  in  others.  From  a  demand-side  perspective,  the  job  creation  potential  of  the 
Belgian economy is hampered by the poor economic situation in its euro area trading partners 
and  by  deteriorating  cost-  and  non-cost  competitiveness  as  a  result  of  nominal  wage 
developments  outpacing  productivity  increases,  rising  prices  of  intermediary  inputs, 
specialisation  in  low-growth  markets,  innovation  capacity  issues  and  a  high  tax  burden  on 
labour. These issues are compounded by supply-side factors such as widespread use of early 
retirement and pre-retirement options, high unemployment traps, persisting skills mismatches, 
low intra- and interregional labour mobility and only moderately effective activation policies. 

In 2012, the Council recommendation for Belgium contained a CSR addressing issues in 
the  labour  market  and  education  policies.  As  outlined  in  the  NRP,  Belgium  has  initiated 
and  pursued  reforms  in  various  areas  to  tackle  these  challenges,  resulting  in  some  progress. 
However, the Europe 2020 employment rate target of 73.2 % appears ambitious. 

24  The  Walloon  labour  market  is  highly  skewed  towards  the  public  sector  but  has  benefited  from  a  positive 
dynamism in the pharmaceutical and chemical industries and in business services. Nevertheless, unemployment 
in  general  and  youth  unemployment  in  particular  remain  worryingly  high.  The  Flemish  labour  market,  with  a 
higher proportion of people in the industry and construction sector, is relatively more dependent on the business 
cycle. Flanders continues to face a high number of ‘shortage’ professions. Employment in the Brussels labour 
market is skewed towards administrative, retail, hospitality and cleaning services with high demand for highly-
skilled labour in specific sectors and a local labour force with predominantly low or even very low skills. Total 
unemployment and youth unemployment have risen to dramatic levels. 

18 

 
 
 
In 2012, Belgium tightened the eligibility conditions and reduced the generosity of old-
age social security and unemployment benefit schemes to curb passive expenditure and 
tackle  disincentives  to  work.  Career-length  and  minimum-age  requirements  for  pre-
retirement  and  early  conventional  pension  schemes  are  being  gradually  increased,  while  the 
part-time  pre-retirement  scheme  has  been  phased  out.  Furthermore,  pension  rights  accrued 
during periods of inactivity will be reduced and the minimum age for the ‘seniority surplus’ 
has  been  raised  from  50  to  55.  To  discourage  labour-shedding  of  older  workers,  social 
security contributions on pre-retirement benefits have been increased and the government has 
proposed legislation to stimulate the development of active ageing strategies at company level 
and  to  require  companies  undergoing  restructuring  to  spread  collective  dismissals  more 
evenly across age groups.  

These  reforms  of  the  old-age  social  security  system  are  projected  to  have  a  non-
negligible  positive  impact  on  the  long-term  sustainability  of  public  finances  and 
employment  among  the  elderly.  However,  given  the  magnitude  of  the  challenge, 
sustained additional reform efforts will be required. In particular, Belgium would need to 
step up its efforts to phase out early exit systems while underpinning the current and future 
reforms  of  the  old-age  social  security  systems  by  employment  support  measures  and  labour 
market reforms conducive to active ageing. Linking the statutory retirement age to increases 
in  life  expectancy  would  contribute  further  to  maintaining  public  finances  at  a  sustainable 
level over the long term. 

The reform of the unemployment benefit system has been enacted in several steps. Since 
January 2012, eligibility requirements for the tide-over allowance for the young unemployed 
have been tightened, monitoring of job search efforts has been stepped up and benefit duration 
has  been  capped  at  maximum  three  years.  As  of  November  2012,  the  rate  at  which  regular 
unemployment benefits are reduced over time has also been increased. Like the reinforcement 
of  the  ‘work  bonus’  for  low-  and  middle-paid  workers,  these  reforms  are  likely  to  have  a 
positive  impact  on  the  search  behaviour  of  the  unemployed.  Effective  monitoring  of  the 
implementation of the reform will have to be ensured to see if further measures are to be taken 
to effectively reduce disincentives to work, notably for older people and vulnerable groups.  

Moreover,  if  unaccompanied  by  effective  job  search  assistance,  training  opportunities 
and  intermediation  policies,  tighter  eligibility  requirements  do  not  by  themselves 
guarantee  a  more  effective  matching  of  labour  supply  and  demand  and  might  even 
increase  the  risk  of  a  decline  in  average  job  quality.  Therefore,  close  follow-up  and 
effective enforcement of job search requirements and appropriate job search and (re-)training 
support are crucial. In this respect, the decision by the federal authorities to create 10 000 paid 
traineeships and to gradually raise the age ceiling for the job search follow-up and the further 
steps taken by the Flemish regional employment service go in the right direction. However, 
the skills mismatch will require continued attention and more fundamental reforms are needed 
to  improve  the  fit  between  the  educational  systems  and  the  labour  market.  Also,  over  the 
coming  years,  additional  financial  investment  in  and  organisational  rethinking  of  the  public 
employment services will be  crucial  to  satisfying  the  growing  demand  by  job  seekers  of  all 
age groups for timely and effective assistance.  

Although  there  has  been  no  comprehensive  tax  reform  in  Belgium,  several  initiatives 
have  been  taken  to  reduce  the  fiscal  burden  on  labour.  As  discussed  above,  the  federal 
authorities have taken measures to increase both the structural and the targeted social security 
contributions reduction, while Flanders revised the wage subsidy for elderly workers, linking 
it to the hired worker’s age and the duration of unemployment spell. 

Belgium  and  its  different  entities  have  partially  addressed  the  2012  CSR  regarding 
greater coherence between education and training (E&T) and employment policies. All 

19 

 
communities and regions have taken actions to adapt their education and training systems to 
the  needs  of  the  labour  market,  in  particular  for  vocational  education  and  training.  Some 
delays  persist  and  these  call  for  determined  follow-up.  The  draft  reform  of  the  secondary 
education  system  launched  in  2010  to  improve  the  quality  of  vocational  education  and 
training (VET) is currently being discussed by the Flemish government, but the 2014 adoption 
deadline is expected to be missed. The implementation of  the series of measures25 taken  by 
the  French-speaking  community  to  reform  its  VET  system  presents  a  mixed  picture.26  In 
parallel, it has launched or planned key measures to raise the quality of compulsory education, 
more  specifically  to  implement  a  learning  outcome  approach  at  secondary  level.  The  Pisa 
2006  survey  provides  evidence  in  support  of  the  benefits  of  school  autonomy/flexibility 
towards  educational  outcomes.27  The  degree  of  school  autonomy  varies  across  networks28 
(official  and  private)  and  is  on  average  higher  in  the  Flemish  community.  Reflections  on 
better and more focused spending have started in all communities, though the pace tends to 
vary. In addition, all communities have taken various measures to address skills mismatches 
in education and training, via better guidance to youngsters on career opportunities, actions to 
promote  the  attractiveness  of  VET,  and  initiatives  to  address  language  proficiency  and 
promote  mathematics,  science  and  technology.  These  are  positive  steps  forward,  which 
however need close monitoring to assess their impact. 

As  regards  early  school  leaving  (ESL),  Belgium  remains  below  the  EU-27  average 
(12.2%  as  compared  with  12.9%  in  2012)  but  above  the  10%  benchmark,  with  no 
evidence  of  further  progress  and  a  diverging  performance  across  regions.  Against  the 
general  European  trend,  ESL  rates  have  been  rising  again  in  Wallonia  and  in  the  Brussels 
Region  since  2009,  reaching  worrisome  levels  in  2012  (15.3%  and  19.9%  respectively).  In 
2012,  a  declining  rate  was  observed  in  the  Flemish  community  which  is  continuously 
improving  its  comprehensive  strategy  with  a  focus  on  disadvantaged  students  and  early 
intervention.  In the French-speaking  community,  Wallonia  and  the Brussels region, existing 
measures  to  tackle  ESL  lack  coherence  and  need  to  be  evaluated,  which  calls  for  the  early 
development  of  comprehensive  evidence-based  strategies  to  tackle  ESL.29  According  to  the 
NRP, a draft decree is under preparation. Nonetheless, there is little information on the use of 
evidence, on focused measures for those most at risk (youngsters with a migrant background), 
on  prevention  measures  (prior  to  compulsory  education)  and  on  the  participation  of  non-
educational actors. The European Social Fund will remain the main EU source of funding for 
youth  employment  policies,  in  particular  through  the  support  of  the  Youth  Employment 

25  ‘CPU’  pilot  project  which  aims  to  decrease  the  level  of  repetition  years,  SFMQ,  a  unique  contract  for 
apprenticeships,  the  development  of  ‘Interagency  Vocational  Education  Steering  Committees  (IPIEQ)  tasked 
with  the  reform  of  the  offer  of  secondary  vocational  education,    the  set-up  of  catchment  areas  and  synergy 
centres, the opening of additional centres of advanced technologies (CTA). 
26  The  CPU  and  learning  outcome  projects  are  progressing  as  planned  whilst  some  others  like  the  IPIEQ 
progressed slower than expected. Initiated in 2010-11, the pilot project 'Qualification by units-CPU' concerns the 
last  two  years  of  compulsory  education  and  should  be  achieved  in  2013-14.  It  introduces  the  concept  of 
certification  by  units.  The  pilot  concerns  5  sectors;  training  programmes  consist  in  different  units  with 
corresponding  learning  outcomes.  It  is  a  response  to  the  Ecvet  approach  that  aims  at  reducing  the  level  of 
repetition  years  and  drop-outs.  Extension  after  the  pilot  phase  with  the  timely  contribution  of  qualification 
profiles by the SFMQ will be crucial. 
27 Inter-regional educational discrepancies in Belgium. How to combat them? Written for the Re-Bel initiative 
Rethinking  Belgium’s  institutions  within  the  European  Context  April  2010,  V.  Vandenberghe,  UCL-IRES-
Economics School of Louvain (ESL). 
28 Official (community, provincial and municipality) and private (confessional and non-confessional) educational  
networks exist in the  different communities (Flemish, French-speaking and German-speaking) 
29 Council Recommendation of 28 June 2011 on policies to reduce early school leaving (2011/C 191/01). 

20 

 
 
Initiative, which will deliver measures targeted at young people not in employment, education 
or training. 

Although different measures have been taken at federal, regional and community levels 
to  support  professional  training  and  adult  learning,  participation  rates  in  lifelong 
learning (LLL) continue to decrease. Increased attention to the effective results in terms of 
skills  improvement  is  needed  and  a  global  evaluation  of  the  LLL  strategy30  is  lacking.  In 
2013, the French-speaking community, the Walloon Region and the Brussels Capital Region 
have launched a reflection on a radical reorganisation of the post-2014 LLL approaches and 
governance  mode  in  line  with  the  transfer  of  responsibilities.  Transparency  and  recognition 
tools are being implemented, though the pace varies across the communities. The preparation 
of a National Qualifications Framework is progressing in the French- and German-speaking 
communities, despite further delay in its adoption (originally expected by the end of 2012). 

Box 4: Poverty and social exclusion 

Poverty  and  social  exclusion  indicators  highlight  a  number  of  worrying  trends,  such  as  an 
above-average  and  rising  proportion  of  people  in  low  work-intensity  households  and  a 
significant  dispersion  of  poverty  risks  across  the  regions.  Moreover,  while  Belgium  outperforms 
the EU-27 averages on most social inclusion indicators, some Belgian population subgroups perform 
worse  than  their  EU  counterparts,  suggesting  the  existence  of  a  number  of  country-specific  issues. 
Thus, for instance, the elderly still face higher income poverty risks than the EU average. To remedy 
the  situation,  the  government  and  social  partners  have  in  recent  years  pursued  a  welfare  adjustment 
policy  which  focuses  on  the  lowest  and  oldest  pensions.  While  this  policy  has  proven  successful  in 
gradually bringing down the elderly income poverty risk, the average improvement observed in recent 
years  masks  a  rather  diverse  reality.  Whereas  first  pillar  pensions  for  civil  servants  are  relatively 
generous,  minimum  private  sector  pensions  are  just  above  the  relative  poverty  line  and  internal 
inequalities are exacerbated by the fact that second pillar pensions are not universally adopted. 

People with a migrant background also face above-average social exclusion risks in all Belgian 
regions.  In  2011,  the  proportion  of  non-EU  nationals  at  risk  of  poverty  or  social  exclusion  stood  at 
66.4 %, by far the highest rate across all Member States and almost 20 pps above the EU-27 average. 
Employment among migrants with a non-European background is extremely low and unemployment 
almost  four  times  higher  than  for  Belgian  citizens.  Although  non-country  nationals  from  within  the 
EU-27 are slightly better off than non-EU nationals, Belgium is clearly less inclusive than the average 
EU Member State in this respect as well. While labour market integration obviously plays a key role, 
the  social  exclusion  of  people  with  a  migrant  background  results  from  a  wider  number  of  mutually 
reinforcing  drivers,  such  as  low  educational  achievement  levels,  the  degree  of  cultural  integration, 
heightened  poverty  and  material  deprivation  risks,  as  well  as  increased  risks  of  intergenerational 
transmission of poverty, ethnic prejudices and gender stereotyping by both the migrant and the native 
communities. Combatting this issue therefore requires an all-encompassing, holistic approach. 

3.4. 

Structural measures promoting growth and competitiveness 

As  highlighted  in  the  2013  IDR,  cost  competitiveness  continues  to  hamper  the  Belgian 
economy.  Fast  nominal  wage  growth  against  the  backdrop  of  weak  productivity  gains 
have resulted in unit labour costs rising faster than the euro-area average (see Graph 1). 
This  trend  is  expected  to  continue  in  2013  and  was  addressed  in  last  year’s  CSR  4,  which 
called for a reform of the system of wage bargaining and wage indexation. In addition, CSR 6 

30 The explicit coherent and comprehensive Flemish Lifelong Learning strategy has been pursued as laid down in 
three main policy documents (Competence Agenda (2007-2010), the 2009-14 policy notes on Education and on 
employment. Similar documents are not available for the French community, Walloon and Brussels regions. 

21 

 
 
 
 
urged  the  authorities  to  strengthen  competition  in  both  the  retail  sector  and  the  networking 
industries  as  well-functioning  product  markets  are  another  important  element  in  a  country’s 
external price competitiveness as captured by the trade-weighted real effective exchange rate. 
For Belgium, the latter has remained largely unchanged in recent years, though at a level that 
indicates  a  protracted  loss  in  external  competitiveness  (see  Graph  2),  accounting  for  the 
observed  losses  in  export  market  shares.  This  contrasts  with  the  general  trend  observed  for 
other  euro-area  countries,  which  have  been  improving  their  competitiveness  noticeably.  As 
discussed  in  the  2013  IDR,  non-cost  elements  also  contribute  to  Belgium's  eroding 
competitiveness. 

Graph 1: Breakdown of Belgian ULCs  Graph  2:  REER  as  compared  with  35 

industrial countries 

)

%

(

y
-
o
-
y
e
g
n
a
h
c

f

o
e

t

a
R

5

4

3

2

1

0

-1

-2

-3

-4

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Inflation (GDP deflator) Compensation per Employee
Real Compensation per Employee
Productivity Contribution (negative sign)
Nominal unit labour cost
ULC in Euro Area

BE

DE

IE

EL

ES

FR

IT

NL

AT

PT

FI

150

140

130

120

110

100

90

00

01

02

03

04

05

06

07

08

09

10

11

12

13f

14f

Source: Commission services 

Source: Commission services 

Cost competitiveness 

As  a  result  of  the  near-universal  application  of  automatic  wage  indexation,  aggregate 
nominal  wage  developments  in  Belgium  are  intrinsically  linked  to  price  developments. 
Since inflation levels regularly exceeded expectations during collective bargaining rounds, the 
cap  on  nominal  wage  evolutions  (‘wage  norm’)  has  repeatedly  been  set  at  a  level  that,  in 
retrospect,  turned  out  to  be  too  high  relative  to  weak  domestic  productivity  gains  and  wage 
developments in neighbouring countries, resulting in a widening wage differential. To restore 
the  incurred  losses  in  cost-competitiveness,  the  Belgian  authorities  have  announced  and 
adopted a series of measures to curb inflationary pressures and bring down the accumulated 
wage gap vis-à-vis neighbouring countries. 

While the automatic character of the wage indexation system has not been altered, the 
Belgian authorities have introduced policies outlined in this year's NRP to limit inflation 
as measured by the health index to which wages are linked. On the one hand the way in 
which this cost of living index is calculated has been revised to take better account of actual 
consumption  patterns  while  on  the  other  hand  measures  have  been  taken  to  curb  actual 
inflationary pressures resulting from energy products.31 Gas and electricity prices were frozen 
from  April  until  December  2012.  The  temporary  freeze  brought  energy  price  developments 
during 2012 more into line with those in neighbouring countries. More structurally, though, 

31 The telecommunication  market has also been the subject of government actions (see below). Energy prices, 
however, have been a main driver behind the strong price pressures of recent years. 

22 

 
 
 
 
 
 
 
 
 
 
measures  adopted  by  the  authorities  to  enhance  price  transparency  and  competition  on  the 
retail market for gas and electricity have contributed to the decrease in energy prices during 
the first months of 2013, limiting overall inflation. This encouraging trend needs confirmation 
over the longer term, also because for some energy carriers price levels remain higher than in 
other EU countries. Specifically, distribution tariffs32 and transportation charges for electricity 
represent  an  important  share  of  the  energy  bill  for  households  and  SMEs.33  Regulated 
distribution  charges  currently  include  the  costs  of  public  service  obligations  and  could  be 
reviewed so as to reflect costs more accurately. 

The  government  has  also  initiated  a  number  of  measures  with  the  aim  of  closing  the 
accumulated  wage  gap  vis-à-vis  the  main  trading  partners  by  2018,  as  discussed  in  its 
NRP. With this aim in mind, a real wage freeze was enacted for the period 2013-14.34 Also, 
the  government  has  earmarked  an  annual  budget  of  EUR  400  mn  for  additional  wage  cost 
reductions. Finally, to prevent future losses in relative cost competitiveness, the government 
has  also  announced  a  reform  of  the  1996  law  on  the  'wage  norm'  but  concrete  legislative 
proposals have not yet been tabled.  

The effectiveness of these measures hangs in the balance as some of them are still to be 
fleshed out and translated into legislation, while the relative impact of measures such as 
the  wage  freeze  will  be  contingent  on  developments  in  Belgium’s  main  trading 
partners.35  It  thus  remains  unclear  at  this  time  whether  they  constitute  an  adequate  policy 
response in the short term. Furthermore, the general practice of wage indexation will continue 
to  over-expose  the  Belgian  economy  to  terms  of  trade  shocks  in  future  years.  Finally,  no 
measures  have  been  adopted  to  allow  for  a  better  alignment  between  wages  and  labour 
productivity developments at local level with the combination of wage indexation and wage 
norm leaving little room for wage dynamics to reflect differences in productivity and labour 
market  conditions.  This  can  be  seen  as  contributing  to  the  large  and  persisting  regional 
disparities  in  employment  and  unemployment  rates  that  characterise  the  Belgian  labour 
market (see Graph 3).  

Graph 3: Regional unemployment and relative unit labour costs 

1
=
e
g
a
r
e
v
a

l

a
n
o
i
t
a
n

-
e
t
a
r

t
n
e
m
y
o
p
m
e
n
U

l

2

1.8

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

Bruxelles-
Capitale

Hainaut

Liège

Région 
wallonne

Namur

Luxembourg 
(BE)

Antwerpen

Vlaams 
Gewest

Belgium

Brabant Wallon

Limburg (BE)

West-
Vlaanderen

Oost-
Vlaanderen

Vlaams-
Brabant

0
0.96

0.98

1

1.02

1.04

1.06

Real unit labour costs - national average=1

Source: EUROSTAT, Commission services’ calculations. 

32 Full competence over these — currently frozen — tariffs is due to be transferred to the regions in 2014. 
33 35% to 45% according to the federal energy regulator CREG (January 2012). 
34 No increases are allowed on top of indexation and bracket increases. 
35 While the margin for real wage growth in 2011-12 was capped at 0.3%, this could not prevent an increase in 
the wage gap given high inflationary pressure. However, the recent alteration in the measurement of inflation for 
indexation purposes may help to address this issue. 

23 

 
 
 
 
 
 
 
All  things  considered,  Belgium  has  made  limited  progress  on  recommendation  4  and 
more structural measures than those taken so far are urgently called for to prevent any 
future  decoupling  between  wages  and  domestic  productivity  developments.  The 
announced  reform  of  the  1996  Law  on  Competitiveness  should  ensure  that  wage  and 
productivity  developments  are  better  aligned  looking  forward,  including  by  taking  more 
account  of  past  losses  in  relative  cost  competitiveness  when  setting  the  wage  norm  and  by 
ensuring that effective ex-post adjustments are enacted at the appropriate level whenever the 
norm  is  not  respected  or  asymmetric  inflationary  shocks  undermine  relative  cost-
competitiveness. In addition, the wage bargaining framework should allow for wages to better 
reflect  productivity  developments  and  labour  market  conditions  at  local  level.  This  would 
favour  employment  creation  and  help  preserve  the  cost  competitiveness  of  Belgian  firms. 
Finally,  and  in  line  with  what  the  government  has  been  doing  recently,  it  could  be  ensured 
that  the  extension  of  collective  bargaining  agreements  to  non-signatory  parties  is  strictly 
conditional upon respect of the wage norm set. 

Research and innovation 

Belgium  has  a  high-quality  research  system,  characterised  by  strong  international 
openness. The broad consensus on the critical importance of further fostering the innovation-
based  competitiveness  of  businesses  is  reflected  in  the  development  of  sophisticated  and 
comprehensive  policy  mixes  at  national  and  regional  levels.  Recent  measures  include  a  tax 
deduction amounting to 80% of patent income and an increase in the payroll withholding tax 
exemption  to  80%  for  qualifying  researchers.  In  the  meantime,  some  improvements  in  the 
relevant indicators have been recorded:   

•  R&D intensity has been on a slightly positive trend since 2005, thanks to increases in 
both  public  and  private  R&D  expenditure.  Still,  reaching  the  2020  target  would 
require  an  annual  growth  rate  of  4.4%.  Moreover,  R&D  is  highly  concentrated  in  a 
few sectors and in a limited number of large, foreign-owned companies. 

•  Exports of high- and medium-tech products have increased significantly since 2005. 

•  Belgium  performs  well  above  the  EU  average  in  relation  to  the  indicators  on 

cooperation between public research institutions and firms. 

In the bio-pharmaceutical sector in particular, high scientific quality and increasing business 
R&D investment have fostered a robust level of product innovation and export performance. 
In order to nurture the same dynamics across a wider range of sectors, Belgium will have to 
speed  up  the  renewal  of  its  economic  fabric.  This  requires  facilitating  the  growth  of 
innovative firms and the further development of the support to clusters in a context of smart 
specialisation, making full use of structural funds. Further decompartmentalising policy fields 
and  reinforcing  overall  strategic  governance  at  regional  level  should  allow  policies  to  have 
greater  effect.36  There  is  also  a  case  for  the  national  and  regional  research  and  innovation 
policies to integrate  demand-side policy tools, such as innovative public  procurement, more 
systematically. 

36  See  in  particular:  OECD  (2013),  Examen  de  l'OCDE  sur  l'innovation  régionale:  Wallonie,  Belgique  2012; 
Vlaams  Raad  voor  Wetenschap  en  Innovatie  (2013),  Advies  186:  Conceptnota  Slimme  specialisatie  strategie; 
Expertgroep  Soete  (2012),  Rapport  van  de  expertgroep  voor  de  doorlichting  van  het  Vlaams  innovatie-
instrumentarium.    

24 

 
 
 
 
Retail and services sector 

Despite efforts to improve the relevant regulatory environment, Belgium still has some 
operational constraints in the retail sector. It continues to be one of the most expensive 
countries, with a price level over 10% above the euro-area average. These higher price levels 
are  the  result  both  of  competitive  restrictions  (e.g.  ban  on  sale  below  costs)  and  structural 
aspects  of  the  country  (e.g.  relative  income  levels).  The  competition  in  the  sector  could  be 
improved  by  tackling  lengthy  administrative  procedures  for  obtaining  authorisations  for 
commercial premises. The business environment for retail activities could be strengthened by 
ensuring  that  the  process  for  adopting  the  envisaged  new  legislative  framework  on 
commercial  establishment  is  completed  swiftly  and  with  effective  coordination  amongst 
regions. 

In  the  services  sector,  Belgium  could  generate  considerable  additional  growth  of  up  to 
1.73%  of  GDP  through  a  more  ambitious  implementation  of  the  Services  Directive37. 
Indeed, barriers preventing service providers from entering the market and offering additional 
services continue to hamper the sector as a whole, such as for instance the territorial validity 
of  authorisations  issued  by  the  regional  authorities.  Professional  service  providers,  which 
include  many  SMEs,  face  a  high  regulatory  burden  that  holds  back  growth  potential. 
Restrictions regarding the legal form through which a company can provide services impede 
the  development  of  certain  business  models  with  higher  innovation  potential  and  restrain 
investment.  

While  the  new  competition  law  replaces  the  existing  institutions  with  a  single 
Competition  Authority  responsible  both  for  investigating  complaints  and  taking 
enforcement  decisions,  the  new  body  remains  composed  of  several  organs.38  The 
independence  and  effective  functioning  of  the  new  Competition  Authority  will  have  to  be 
monitored in the light of this new allocation of powers and also considering whether sufficient 
financial  resources  and  staff  have  been  allocated  to  enhance  its  ability  to  enforce  the 
competition rules effectively. 

Electronic communications, transportation and postal services 
While  mobile  telephony  rates  have  been  decreasing,  they  remain  above  EU  averages39 
and  price  correction  has  not  extended  to  mobile  data  so  far.  Switching  internet  service 
providers remains difficult, mainly due to limited competition in the sector and unclear offers 
which make it difficult for consumers to make informed choices.40 The independence of the 
telecom  regulator  could  be  further  reinforced  as  the  government  is  currently  empowered  to 
suspend  or  amend  its  decisions,  which  raises  questions  about  the  independence  of  the 
regulatory decision-making process. 

37 The economic impact of the Services Directive: A first assessment following implementation, June 2012, J. 
Monteagudo, A. Rutkowski and D. Lorenzani, European Commission. 
38 President and his service, Competition Board, Management Committee, Auditor-General and the College of 
Auditors. 
39  According  to  the  Digital  Agenda  Scoreboard  2013  the  'average  revenue  per  user'  (ARPU)  in  Belgium 
decreased from 260 in 2010 to 237 in 2011, well above the EU average of 195. 
40  According  to  the  Consumer  Markets  Scoreboard  (December  2012,  European  Commission,  DG  SANCO, 
http://ec.europa.eu/consumers/consumer_research/editions/cms8_en.htm),  internet  services  in  Belgium  perform 
poorly  in  terms  of  choice  of  suppliers  and  ease  of  switching  suppliers.  An  in-depth  market  study  (May  2013, 
European Commission, study on behalf of DG SANCO) on the functioning of the market for internet access and 
provision from a consumer perspective found problems with the clarity and correctness of bills and offers. 

25 

 
 
 
While mobile broadband penetration increased over the past year, it is still amongst the 
lowest in the EU (33.3% as compared with an EU average of 54.1%). This situation is further 
aggravated by the slow rollout of mobile networks, hampered by administrative obstacles that 
hinder investments and the development of the latest technologies. Belgium is one of the few 
remaining  countries  in  Europe  where  the  800  MHz  band  is  still  not  available  for  mobile 
broadband,  though  an  auction  of  the  band  is  planned  for  later  this  year.  Very  strict  electro-
magnetic-field  norms  in  the  Brussels  Region  are  another  obstacle  to  mobile  broadband 
deployment. These serious administrative coordination problems risk further fragmenting the 
market for electronic communications in Belgium. 

Market entry barriers and the abuse of  dominant positions in  the  transport  sector are 
still  preventing  the  market  from  functioning  efficiently.  Unlike  other  Member  States, 
Belgium  has  still  not  opened  up  its  domestic  rail  passenger  market  to  competition.  New 
legislation has been adopted at federal level on regulatory services for railway transport and 
for  airport  operations,  reinforcing  the  independence  of  the  regulatory  function  for  railway 
transport and, to some extent, the regulation of airport charges at Brussels National Airport. 
However, there is scope to further improve the independence of the transport regulators, both 
at  the  federal  level  (Brussels  National  Airport)  and  the  regional  level  (Brussels-South 
Charleroi  Airport).  The  port  labour  legislation  prevents  port  service  providers  from  freely 
choosing  their  workforce  and  requires  potential  workers  to  register  in  a  labour  pool  from 
which employers must select port workers. 

A political agreement has been reached on the reform of the national railway company 
NMBS/SNCB, whereby the current tripartite structure should become a two-fold one, with an 
infrastructure manager and a railway service provider. The umbrella holding will disappear, 
though  the  entities  will  share  a  service  organisation  running  a  common  human  resources 
policy.  This  reform  has  not  yet  been  implemented  and  questions  remain  as  to  how  the 
discontinuation of the holding and the creation of this new joint venture will play out. 

No  progress  has  been  achieved  in  relation  to  the  regulatory  barriers  identified  in  the 
postal  sector.41  The  amended  postal  legislation  raises  serious  concerns,  particularly  the 
provision concerning licensing conditions, especially those regarding mandatory geographical 
and  daily  coverage  and  requiring  a  uniform  tariff  for  licensed  services.  Suboptimal 
functioning of the postal market is reflected in consumer surveys.42 

Energy, environment and climate change 

Projections for greenhouse gas emissions in 2020 indicate that Belgium will miss its 15% 
reduction  target  by  11  pps.  It  also  remains  unclear  how  isolated  initiatives  taken  by  the 
various  authorities  will  ensure  that  the  collective  target  is  met.  This  general  lack  of 
coordination and effort-sharing agreement between authorities is also the main concern with 
regard  to  the  national  renewable  energy  target  of  13%  by  2020,  together  with  the  need  to 
complete transposition of the Renewable Energy Directive. 

41 Pursuant to a Commission Recovery Decision, the Belgian authorities have recovered the incompatible state 
aid that incumbent postal operator bpost received in 2006-10 and measures are under consideration to ensure that 
bpost will not benefit from over-compensation in the future. 
42  According  to  the  Consumer  Markets  Scoreboard  (December  2012,  European  Commission,  DG  SANCO, 
http://ec.europa.eu/consumers/consumer_research/editions/cms8_en.htm),  postal  services  are  rated  by  Belgian 
consumers 6th lowest in the EU and the 5th lowest in terms of choice of suppliers. 

26 

 
 
 
Belgium is among the countries with the lowest share of environmental taxation in total 
tax  revenues  and  there  was  no  significant  tax  shift  in  2012.  At  29.2%  in  2011,  Belgium 
had the highest ratio of fossil fuel subsidies to environmental taxes among EU Member States, 
with annual fossil fuel subsidies reaching EUR 2.1 bn or EUR 194 per capita.43 This implies 
that  one  third  of  environmental  taxation  revenues  is  being  spent  on  fossil  fuel  subsidies  — 
particularly  through  reduced  diesel  excise  taxes  for  certain  groups  of  consumers  –  although 
the  2013  Annual  Growth  Survey  recommends  phasing  out  such  environmentally  harmful 
subsidies. 

Road  transport  offers  considerable  potential  for  lowering  non-ETS  greenhouse  gas 
emissions,  the  subject  of  last  year’s  recommendation  7.  Congestion  is  placing  a 
particularly heavy burden on the Belgian economy and environment.44 Therefore, road pricing 
or  congestion  charges  as  well  as  further  scaling  back  tax  exemptions  for  company  cars  and 
fuel  cards  could  reduce  negative  transport  externalities.  However,  the  introduction  of  a 
kilometre-driven charge for trucks and an electronic road vignette for passenger cars has been 
delayed until 2016. Apart from a project to introduce integrated ticketing for buses, trams and 
trains  and  to  stimulate  demand-led  supply  –  the  introduction  of  which  may  be  possibly 
delayed until 2015 – no significant initiatives have been put forward to make public transport 
more efficient. Completion of the Brussels Regional Express Network (GEN/RER), initially 
planned  for  2012,  is  now  not  expected  until  2020-25.  The  Commission  services  therefore 
consider that Belgium has made no progress with regard to recommendation 7. 

Regarding  the  energy  markets,  ensuring  effective  competition  at  retail  level  for 
electricity  and  gas  and  at  wholesale  level  for  electricity  remains  a  challenge,  whereas 
domestic  production  capacity  looks  likely  to  fall  below  a  level  commensurate  with  a 
robust security of supply. While higher consumer switching has diminished the dominance 
of  the  historical  operator  in  generation,  it  requires  further  monitoring.  Although  the  federal 
energy  regulatory  body  (CREG)  saw  its  competences  bolstered  in  2011,  full  operational 
independence from political interference has not yet been assured. A clearer policy response 
is needed to the CREG’s warning that shortages in domestic production could arise by 2015, 
undermining security of supply.45 Efforts to further integrate the physical grid and electricity 
markets  with  neighbouring  countries  should  be  pursued,  as  enhanced  interconnection  could 
help  to  accommodate  higher  levels  and  peaks  in  demand.  Furthermore,  a  review  of  the 
contingency  planning  in  energy  capacity  and  required  investments  in  domestic  production 
capacity  seems  necessary.  For  instance,  to  provide  a  stable  framework  for  investment,  any 
uncertainty  about  the  life  expectancy  of  existing  nuclear  plants  should  be  removed.  Finally, 
the  regulatory  authorities  at  federal  and  regional  level  should  improve  their  coordination  in 
order to promote transparency, consistency and efficiency. Particular areas of attention are the 
relation between, on the one hand, the adequacy of generation and grid capacity and, on the 
other  hand,  the  promotion  of  renewable  energy,  the  setting  of  transmission  and  distribution 
charges;46 and the development of EU-wide network codes.47 

43 Based on OECD data available at http://www.oecd.org/site/tadffss. 
44 Estimates of the cost of congestion go as high as 2 % of GDP, among the highest in Europe. 
45  Belgium  almost  had  to  activate  its  contingency  plan  in  January  2013,  as  electricity  demand  approached  the 
maximum supply: domestic capacity was down with several nuclear plants offline and the imported volume of 
electricity was close to its maximum. 
46  These  are  federal  and  partly  regional  competences  respectively,  which  implies  unnecessary  regulatory 
overhead costs and hence a loss in synergies. 
47 These affect regulatory issues for which regional authorities bear the main responsibility even though they are 
excluded from discussions at EU level. 

27 

 
 
Overall  progress  on  recommendation  6  has  been  limited  given  the  outstanding  issues 
with regard to product markets and networking industries, which have been addressed 
only partially over the past year. 

3.5.  Modernisation of public administration 

The World Bank’s Government Effectiveness indicator suggests that Belgium continues 
to  outperform  the  EU  average  in  overall  public  administration  performance,  with  an 
index  of  94,  as  compared  with  an  EU  average  of  82  in  2011.48  Perceived  quality  of  public 
services,  including  the  quality  of  the  civil  service  and  policy  implementation  in  Belgium  is 
quite good, although  not  exceptional.  On the other hand, the use of tools to improve public 
administration performance is less widespread than the average across the Member States and 
inefficient  government  bureaucracy  has  been  identified  as  one  of  the  factors  causing  most 
problems for those wanting to do business in Belgium.49 

One  of  the  main  tools  for  administrative  simplification  is  the  use  of  ICT  in  public 
administration.  Reforms  in  public  administration  to  further  the  impact  of  information  and 
communication  technologies  are  progressing  slower  than  in  other  service  sectors.  Belgium 
could  make  use  of  the  European  Structural  and  Investment  Funds  to  further  strengthen  ICT 
applications  for  e-government,  e-learning,  e-inclusion  and  e-health.  Furthermore,  evidence-
based instruments, such as comprehensive impact assessments, are rarely used, even though 
they  would  improve  policy  coherence  and  effectiveness,  strengthen  the  evidence  base  of 
measures  and  save  costs  (e.g.  costs  of  non-action,  costs  caused  by  lock-in  effects  of 
inadequate measures, and indirect and long-term costs). 

The ease of obtaining business licences also differs at the regional level. Brussels Capital 
Region  and  Wallonia  have  one-stop-shops  while  Flanders  is  lagging  behind.  It  is 
important  to  address  the  limitations  of  the  Belgian  system  of  single  points  of  contact,  in 
particular  as  regards  enabling  businesses  to  complete  administrative  procedures  online.50 
Belgium has recently adopted a package to modernise its public procurement legislation and 
initiatives  are  being  taken  at  the  federal  and  regional  levels  to  simplify  and  streamline 
investment  procedures  and  to  enhance  the  performance  of  the  authorities  vis-à-vis  the 
business sector.51 

Structural  fund  absorption  in  Belgium  in  the  current  programming  period  is 
comparatively high for both ERDF and ESF. Nevertheless, the complex architecture of the 
ESF  programmes  calls  for  effective  coordination  between  the  regional,  community  and 
federal  management  authorities.  Joint  priority-  and  target-setting  during  the  operational 

48 Scale of 0 to 100; 100 = best. Belgium increased its ranking by one notch as compared with 2010. 
49 According to the World Economic Forum Global Competitiveness Report 2012-13. 
50  Belgian  points  of  single  contact  are  unsatisfactory  in  particular  as  regards  user-friendliness,  the  online 
completion of procedures, the integration between the central portal and the nine decentralised contact points and 
awareness of the contact point among business users. 
51  One  of  the  projects  covered  by  the  Flemish  multiannual  programme  'Slagkrachtige  overheid'  (Decisive 
Governance)  concerns  fast  procedures  for  investment  files.  An  example  of  this  is  the  Flemish  government’s 
decision (July 2011) to introduce a single permit integrating the environmental with the urban planning licences. 
Wallonia and the French Community continue to implement their Administrative Simplification Plan (Ensemble 
Simplifions) and Industry Action Plan, aiming to minimise administrative complexity and reduce administrative 
burdens for all users of public services, particularly companies. The introduction of the confidence principle was 
launched as a pilot project. To achieve the 25 % reduction goal, the Brussels government approved a list of 11 
projects; the main focus is on businesses. The new federal government established the priority of reducing the 
administrative burden for all companies by 30 % by 2014. 

28 

 
 
 
programme design phase would mean that transregional issues (e.g. low inter-regional labour 
mobility  from  Brussels  towards  the  two  other  regions)  could  be  tackled  more  effectively, 
increase  the  overall  coherence  of  the  action  being  financed  and  improve  targeting  of 
investments.  In  addition,  regular  formal  exchanges  between  the  management  authorities 
throughout the Operational Programme cycle would reduce the risk of double-financing and 
improve the programmes' capacity for coordinated action. 

29 

 
4.  OVERVIEW TABLE 

2012 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR 1: Implement the budget for the year 2012 to make 
sure  that  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 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 
and 
of 
accountability across government layers. 

burden-sharing 

transparency 

CSR 2: 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 
take  further  steps  to  ensure  an  increase  in  the  effective 
retirement  age,  including  through  linking  the  statutory 
retirement age to life expectancy. 

Partial implementation / Limited progress 
Belgium did not correct its excessive deficit by the 
2012  deadline.  This  was  partly  due  to  the  urgent 
need to recapitalise the Banking Group Dexia at the 
end of 2012. However, even without this operation 
the deadline would have been missed. The average 
annual  fiscal  effort  is  estimated  at  0.3%  of  GDP, 
significantly below the ¾ % of GDP recommended 
by the Council. 

In 2013, the deficit is expected to decrease to 2.9% 
of GDP. It is projected to rise again in 2014 (to 3.1 
%). Hence the correction is not yet sustainable. 

No  progress  has  been  made  on 
fiscal 
framework. A revision of the Law on the financing 
of  regions  and  communities  is  under  way,  but  this 
will  not  alter  the  current  ad  hoc  effort-sharing  of 
budgetary targets. 

the 

Partial implementation / Some progress 
The reform of the old-age social security system is 
well  under  way  and  the  bulk  of  the  measures  has 
either  been  legally  adopted  or  is  on  schedule.  First 
projections  underline  the  positive  impact  of  the 
reforms enacted. Nevertheless, given the magnitude 
of the challenge, Belgium is still likely to fall short 
of the elderly employment objective it set for itself 
if no additional measures are taken. In addition, the 
positive  contribution  of  the  enacted  reforms  to  the 
long-term  sustainability  of  public  finances is  likely 
to be partially offset by lower growth as a result of 
the crisis. Current plans to transfer competencies in 
the  field  of  long-term  care  (e.g.  residential  elderly 
care  homes)  from  the  federal  level  to  communities 
may,  at  least  partially,  address  the  inefficiency 
issues raised by administrative complexity. 

No  measures  have  been  taken  to  link  the  statutory 
retirement age to life expectancy. 

Additional  measures 
the  field  of  publicly 
in 
reimbursed  medicinal  products  in  the  outpatient 
sector came into effect on 1 April 2012 and 1 May 
2012, 
the 
thus  bringing  efficiency  gains 
healthcare  sector  over 
last  year.  Further 
measures  in  the  outpatient  sector  announced  for 
2013  concern  budget 
for  clinical 
(diagnostic)  laboratories  and  cholesterol-lowering 
medicinal  products.  For 
inpatient  sector, 
changes  in  lump  sum  financing  were  introduced  in 
2013. 

reductions 

the 

the 

in 

CSR 3: Stimulate capital increase of the weakest banks  Full implementation 

30 

 
 
 
 
to underpin the strength of the banking sector so that it 
can play its normal role in lending to the economy. 

CSR 4: 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. 

for 

taxes 

including 

CSR  5:  Significantly  shift  taxes  from  labour  to  less 
growth-distortive 
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 older workers and 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  and  to  strengthen  the  coherence  between 
education,  lifelong  learning,  vocational  training  and 
employment  policies.  Extend  existing  activation  efforts 
to all age groups. 

31 

- Dexia was recapitalised by the Belgian and French 
state at the end of 2012. 
- KBC increased its capital and reimbursed state aid 
ahead of schedule. 
-  Belfius  is  100 %  state-owned  and  is  currently 
adequately capitalised. 
-  Other  big  Belgian  banks  (ING,  BNP  Paribas)  are 
part of bigger, international banking groups. 

the 

Partial implementation / Limited progress 
To  restore 
in  cost-competitiveness 
losses 
incurred  in  past  years,  the  Belgian  authorities  have 
(a) taken measures to curb inflationary pressures in 
several  key  markets  and  (b)  started  to  implement 
various  reforms  to  bring  down  the  accumulated 
wage gap vis-à-vis neighbouring countries by 2018.  

Although overall inflation has been declining and is 
projected  to  remain  low  throughout  2013,  it  is 
unclear  if  the  initiated  trend  can  be  sustained  over 
the  longer  run.  Also,  as  a  result  of  regulatory 
barriers,  a  lack  of  competition  remains  in  several 
other  networking  industries  and  service  and  goods 
sectors.  This  might  contribute  to  persisting  upward 
pressure on the general price level which, due to the 
widespread  practice  of  wage  indexation,  indirectly 
feeds back into wage inflation. 

With  regard  to  the  wage  gap  relative  to  trading 
partners, so far the Belgian authorities have focused 
their  reform  efforts  on  remedial  measures  intended 
to  bring  nominal  wage  evolutions  back  into  line 
with  the  low  productivity  levels  observed  in  recent 
years. 

No measures have been taken to facilitate the use of 
opt-out  clauses  and/or  to  ensure  better  alignment 
between  wage  and  productivity  evolutions  at 
sectorial level. 

Partial implementation / Some progress 

No  major  shift  of  labour  taxes  to  less  growth-
distortive  taxes:  existing  reductions  of  employer’s 
social  security  contributions  have  been  increased, 
new  reductions  have  been  added  and  the  ‘work 
bonus’ for the low paid has been reinforced. Those 
reductions  will  be  compensated  by  an  increase  in 
the withholding tax on capital income. 

The  reform  of  the  unemployment  benefit  system 
accelerates 
the 
unemployment allowance and ensures that it applies 
to all beneficiaries. 

decrease 

gradual 

the 

of 

Progress  is  observed  as  regards  efforts  in  all 
communities (and regions) to increase the relevance 
of  the  E&T  systems  as  regards  the  needs  of  the 
labour  market.  VET  reform  delays  call  for  swift 
follow-up. 

 
 
 
 
 
 
 
 
Disparities  in  E&T  performance  are  reflected  in 
regional  unemployment  levels  and  in  people  more 
at  risk.  There  is  a  mixed  picture  as  regards  the 
coherence  between  education  and  employment 
policies  given  the  specific  needs  of  the  migrant 
population.  Measures  are  less  developed  in  the 
French community and there is a lack of surveys. 

the 

labour  market 

The  efforts  to  increase  the  traineeship  and  lifelong 
learning  capacity  are  positive  developments  but  a 
more  fundamental  reflection on  the  fit between  the 
educational  system  and 
is 
required as well as on the effective results of adult 
training  in  terms  of  skills  acquired.  Moreover,  the 
interaction between the traineeship support schemes 
developed  at  the  federal  level  and  those  developed 
by 
regions  could  generate  considerable 
complexity and potential dead-weight losses. Closer 
coordination  of  efforts  taken  in  this  field  would  be 
beneficial. 

the 

Existing  multilateral  and  bilateral  cooperation 
agreements  on  labour  mobility  continue  to  be 
honoured  but  there  is  room  for  more  ambitious 
target setting and financial investment.  

The  age  ceiling  below  which  the  unemployed  are 
actively  followed  up  has  been  raised  to  55  in  all 
regions. A further increase to 58 is due by 2016. 

Partial implementation / Limited progress 

-  Retail:  All  three  regions  are  considering  new 
retail 
legislation  on 
of 
establishments.  However, 
competence  from  the  federal  to  the  regional  level 
will probably not be finalised before 2014.   

the  opening  of 

large 
transfer 

the 

Competition  Authority 

A  new  competition 
is  currently  under 
law 
discussion in Parliament which gives more power to 
the 
de 
Concurrence)  and  reinforces  the  role  of  the  Price 
Observatory 
in  monitoring  unwarranted  price 
increases. 

(Conseil 

time 

third 

increasing 

-  Energy:  The  Law  of  8  January  2012  implements 
the 
internal  energy  market  directives 
(Directives 2009/72/EC and 2009/73/EC) and gives 
more  power  to  the  national  regulator,  while  at  the 
consumer  protection, 
same 
promoting  renewable  energy, 
imposing  stricter 
unbundling  rules  on  regulators  and  raising  the 
competent authorities’ awareness of the need to take 
structural  measures.  Price  increases  not  resulting 
from  indexation  must  receive  advance  clearance 
through  benchmarking  with 
from 
is 
neighbouring 
temporary  and  will  expire, 
in  principle,  on 
31 December 2014.  Electricity  and  gas  prices  were 
frozen  in  2012.  Now,  energy  prices  are  again 

countries.  The  mechanism 

the  CREG 

CSR 6: Continue to strengthen competition in the retail 
sector  by  lowering  barriers  and  reducing  operational 
strengthen 
restrictions. 
competition  in  the  network  industries  by  revising 
regulatory  barriers  and  reinforcing  the  institutional 
arrangements for effective enforcement of state aid rules.

Introduce  measures 

to 

32 

 
 
 
 
 
 
 
 
 
subject  to  market  forces,  though  they  will  have  to 
input  costs.  Belgian 
reflect  relevant  and  real 
consumers  were  more  price-conscious  and  found  it 
easier 
to  change  provider,  which  encouraged 
providers  to  keep  their  prices  at  or  below  2012 
to  control 
levels.  The  government’s  decision 
end-user  electricity  and  gas  prices  at  retail  level 
may  have  a  negative  impact  on  investments  and 
generate  losses  for  the  companies  which  are  not 
sustainable  in  a  market  economy.  Belgium  is 
already short on generation capacity and this system 
may create additional uncertainties for new entrants 
on the market. 

to 

-  Electronic  communications:  The  government 
took  measures 
increase  competition  and 
consumer  protection.  The  new  Telecom  Law 
(October  2012)  allows  the  consumer  to  compare 
easily and terminate the contract after six months. It 
is  still  unclear  to  what  extent  this  will  improve 
competition and drive prices down 

-  Railways:  A  political  agreement  was  reached  on 
the reform of the NMBS/SNCB Holding, aiming to 
make  it  less  complex,  more  transparent  and  more 
service-oriented  (safety,  punctuality).  A  two-fold 
structure  will  be  introduced,  involving  (1) the 
infrastructure manager (Infrabel) and (2) the railway 
service  provider  (NMBS/SNCB).  Social  dialogue 
has  started  in  a  very  tense  climate.  There  is  no 
certainty 
effective 
implementation of the political agreement. Also, no 
progress  has  been  made  on  opening  the  domestic 
rail passenger market to competition. 

timely 

about 

and 

yet 

-  Independence  and  strength  of  the  transport 
regulators:  New  legislation  has  been  adopted  at 
federal  level  on  regulatory  services  for  railway 
transport  and  airport  operations,  reinforcing  the 
independence  of  the  railway  transport  regulatory 
function. 

- Port labour: The port labour legislation prevents 
port  service  providers  from  freely  selecting  their 
workforce  (potential  workers  must  be  registered  as 
part  of  a  labour  pool  from  which  employers  must 
select  port  workers).  Belgium  has  not  taken  any 
corrective action. 

No implementation / No progress achieved 

Belgian  emissions  projections  remain  well  above 
the target. 

There  appears  to  be  no  clear  agreement  on  how  to 
work towards the non-ETS activity greenhouse gas 
targets. There appears to be no agreement on how to 
use  auctioning  revenue,  of  which  at  least  50 % 
should be used for climate-related purposes. 

Whereas  individual  federated  entities  have  made 

CSR  7:  Take  further  measures  to  enhance  the  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. 

33 

 
 
 
 
 
 
 
 
progress  in  developing  policy  plans,  most  of  these 
are  not  definitive  or  implemented  and  there  seems 
to  be  a  lack  of  coordination  between  the  various 
authorities.  On  fiscal  measures,  the  abolition  of 
almost  all  federal  incentives  for  energy  efficiency, 
heat  pumps  and  solar  panels  will  probably  have  a 
negative  impact  on  the  achievement  of  greenhouse 
gas  and  renewables  targets.  It  is  not  clear  whether 
regional  incentives  will  be  more  effective  or  more 
cost-efficient. 

of 

reasons 

Transport 
-  Fiscal  measures:  The  effect  on  greenhouse  gas 
emissions  of  new  federal  fiscal  measures  — 
fiscal 
for 
introduced  mainly 
consolidation  —  is  unclear,  but  could  in  certain 
cases  entail  more  emissions  from  transport.  In  this 
respect,  relevant  fiscal  measures  are  the  company 
car  taxation  reform  and  the  abolition  of  the  eco-
premium 
for  environment-friendly  cars.  The 
‘greening’  of  Flanders’  first  registration  car  tax  in 
2012  is  welcome.  The  reform  whereby  the  annual 
vehicle  circulation  tax  will  become  a  true  eco-tax 
will probably not be introduced until 2016. 

the 

-  Road  charging:  The  implementation  of  the 2011 
political  agreement  on 
introduction  of  a 
kilometre-driven charge for trucks and an electronic 
road  vignette  for  passenger  cars  has  been  delayed 
until 2016. There is no certainty yet about credible, 
timely,  correct  and  effective  implementation  of  the 
political agreement. 

-  No  significant  new  initiatives  have  been  put 
forward to make public transport more efficient and 
further  reduce  greenhouse  gas  emissions  from 
transport. 

Europe 2020 (national targets and progress) 

Employment rate target set in the 2011 NRP: 73.2 % 

R&D target: 3 % by 2020 

The employment rate stood at 
67.1 % in 2009 
67.6 % in 2010 
67.3 % in 2011 
67.2% in 2012 
Despite  stronger  than  average  employment  growth, 
the  employment  rate  has  been  stagnating  at  a 
below-average  level  due  to  faster  growth  in  the 
working-age population. 
In  the  light  of  past  performance,  the  employment 
rate target seems ambitious      

R&D intensity has been on a slightly positive trend 
since 2005, thanks to increases in both public R&D 
expenditure (from 0.56 % to 0.65 % of GDP) and in 
private  R&D  expenditure  (from  1.24 %  to  1.37 %). 
However, Belgium is not on track to reach its 2020 
target. 

Greenhouse gas (GHG) emissions target: 
 -15 % (compared to 2005 emissions, ETS emissions not 

Change  in  non-ETS  greenhouse  gas  emissions 
between 2005 and 2011: -11 %. 

34 

 
 
 
 
covered by this national target) 

Renewable energy target: 13 % 
Share of renewable energy in the transport sector: 10 % 

Indicative  national  energy  efficiency  target  for  2020: 
reducing primary energy consumption by 18% compared 
to projections for 2020 

Early school leaving target: 9.5 % 

Tertiary education target: 47 % 

35 

to 

the 

According 
latest  national  projections 
submitted  to  the  Commission  and  taking  into 
account  existing  measures,  it  is  expected  that  the 
target will be missed: -4 % % in 2020 as compared 
with 2005 (i.e. a projected shortfall of 11 percentage 
points). 

Share  of  total  renewable  energy  in  gross  final 
energy  consumption  was  4.1  %  in 2011  and 0.3  % 
in the transport sector. (Source: Eurostat's estimate. 
April  2013.  For  2011,  only  formally  reported 
biofuels compliant with Art. 17 and 18 of Directive 
2009/28/EC are included). 

Belgium  has  set  an  indicative  national  energy 
efficiency target in accordance with Art. 3 and 24 of 
the  Energy  Efficiency  Directive  (2012/27/EU). 
However, it has neither expressed it, as required, in 
terms  of  an  absolute  level  of  primary  and  final 
energy  consumption  in  2020,  nor  has  provided 
information on the basis on which data this has been 
calculated. 

Belgium  (12.3 %  in  2011)  still  outperforms  the  EU 
average in terms of early school leaving. However, 
the  situation  has  deteriorated:  it  is  one  of  two 
countries  which  faced  an  increase  in  the  early 
school  leaving  rate  between  2009  and  2011  (from 
11.1 %  to  12.3 %),  cancelling  out  longstanding 
efforts  to  achieve  a  modest decrease  between 2006 
and  2009.  Pupils  from  migrant  backgrounds  are 
almost twice as likely to leave school early. 
Achieving  the  national  target  of  9.5 %  in  2020 
might  become  a  real  challenge  and  requires 
collective  effort.  The  situation  deteriorated  in  all 
regions,  with  2011  rates  above  the  EU  average  in 
Wallonia  (14.7 %)  and  the  Brussels  Capital  Region 
(15.6 % in 2009, 18.4 % in 2010, 18.9 % in 2011). 
The  Flemish  community  continues  to  improve  its 
comprehensive early school leaving strategy with a 
focus  on  disadvantaged  pupils  like  those  from 
migrant backgrounds. Despite the various measures 
that  have  been 
the  French-speaking 
community,  the  Walloon  region  and  the  Brussels 
Capital  Region  do  not  have  a  comprehensive 
evidence-based  strategy  to  tackle  early  school 
leaving. It is crucial to speed up the preparation by 
end  2013,  and  swift  adoption  of  the  draft  decree 
announced to tackle ESL.   

taken, 

in  2020,  which  appears 

Belgium’s 
tertiary  attainment  rate  significantly 
exceeds  the  EU  average  (43.0%  as  compared  with 
35.8 % in 2012). The national target has been set at 
47 % 
feasible.  All 
communities  have  taken  measures  to  widen  access 
and  address  the  persistent  high  drop-out  rates. The 
2013  draft  decree  on  the  modernisation  of  the 
higher  education  landscape  in  the  French-speaking 
community  aims  inter  alia  to  reduce  the  drop-out 
rate  and  to  improve  quality.  However,  it  lacks 

 
 
 
Target on the reduction of population at risk of poverty 
or  social  exclusion  in  number  of  persons:  Reduce  the 
number  of  people  at  risk  of  poverty  or  social  exclusion 
by  at  least  380 000  people,  compared  to  2008  (from 
2 194 000 to 1 814 000) 

information  on  the  financing  of  the  reform  and  on 
quality/performance criteria. 
The Flemish reform of higher vocational education 
(HBO5) is progressing more slowly than expected 

The  number  of  people  at  risk  of  poverty  or  social 
exclusion amounted to 
2 145 000 in 2009 
2 235 000 in 2010 
2 271 000 in 2011 
As  a  result  of  the  upward  trend  in  recent  years, 
Belgium  is  further  removed  than  ever  from  the 
social  inclusion  target  it  set  for  itself,  which  now 
seems highly ambitious. 

36 

 
5.  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-
2009

2010

2011

2012

2013

2014

2.6
-0.3
1.3
2.2
9.2
20.4
25.5

-2.5
122.1
-110.2
48.7
51.2
7.8

2.0
0.5
2.0
1.5
7.5
20.0
25.5

0.0
102.0
-91.8
49.6
49.6
5.7

1.1
0.9
2.2
1.5
7.8
21.3
24.7

-1.7
89.8
-77.0
48.6
50.3
3.9

2.4
-0.8
2.3
1.7
8.3
20.0
23.6

-3.8
95.5
-79.8
48.7
52.4
3.4

1.8
0.0
3.4
1.8
7.2
20.7
22.8

-3.7
97.8
-81.3
49.5
53.2
3.3

-0.2
-1.1
2.6
-0.6
7.6
20.7
22.2

-3.9
99.6
n.a
50.8
54.7
3.4

0.0
-1.9
1.3
-0.4
8.0
20.3
22.1

-2.9
101.4
n.a
51.1
54.1
3.2

1.2
-1.5
1.6
1.1
8.0
20.5
22.2

-3.1
102.1
n.a
51.0
54.2
3.2

1.3

-0.1

0.9

4.0

2.6

2.1

2.0

2.2

n.a
n.a
13.2
23.2

n.a
n.a
13.2
22.7

n.a
n.a
13.4
23.0

-97.3
-5.3
13.4
20.8

-85.3
-5.5
12.7
20.5

-99.2
5.0
13.9
24.1

2.4
n.a
39.5
7.4
23.1
9.0

-113.0
8.7
12.5
23.8

-108.3
-1.3
14.0
23.0

2.2
202.5
39.0
7.7
22.6
8.9

4.9
241.8
39.4
10.2
21.6
10.7

2.8
204.8
38.8
8.6
22.5
9.7

5.7
239.9
38.9
12.0
22.1
12.1

3.2
215.1
38.7
8.7
21.5
10.1

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 goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on 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.

0.9
-22.4
1.2
1.1
-0.2
37.5
51.9
5.1
106.1
97.6
97.5

2.9
-16.7
2.3
2.0
-0.1
37.4
51.9
5.0
104.2
98.9
96.6

0.8
n.a
1.3
0.9
-0.1
37.0
52.1
5.1
105.8
97.2
97.4

4.5
-36.5
3.8
1.8
0.0
42.5
47.1
4.7
101.8
103.0
112.9

2.2
-26.6
3.0
0.7
-0.3
39.1
50.2
4.9
103.4
99.3
97.7

4.8
-45.3
4.5
1.6
-0.1
41.0
48.4
4.6
97.1
100.7
104.9

1.7
n.a
1.9
1.0
0.3
n.a
n.a
n.a
107.6
97.3
95.5

1.9
n.a
1.8
1.1
0.5
n.a
n.a
n.a
108.5
97.3
96.8

2.8
n.a
39.4
7.3
23.6
9.2

3.0
n.a
39.8
7.1
23.6
9.4

Source :
Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

37 

 
 
 
 
 
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)

2012

2013

2014

2015

2016

COM SP

COM SP

COM SP

-0.2

-0.6

-0.6
0.4
-0.1

-0.4

-0.2

0.4

-1.1
0.2

7.6

-0.4

2.6

2.1

3.3
0.8

-0.2

-0.7

-0.5
0.6
0.0

-1.1

-0.4

0.5

-1.1
0.2

7.3

-0.3

2.8

2.1

3.3
1.2

0.0

0.0

-1.6
0.8
0.2

-0.2

-0.2

0.5

-1.9
0.1

8.0

-0.1

1.3

1.6

2.4
1.9

0.2

0.3

-1.1
0.5
0.4

0.1

0.0

0.1

-1.9
0.0

7.5

0.2

1.4

1.8

1.6
1.8

1.2

1.2

1.6
3.3
3.3

1.1

0.0

0.1

-1.5
0.6

8.0

0.6

1.6

1.7

1.1
1.7

1.5

0.9

1.7
3.1
2.5

1.0

0.0

0.6

-1.4
0.6

7.6

1.0

1.3

1.6

1.5
2.8

SP

1.6

1.0

2.3
3.8
3.4

1.2

0.0

0.4

-0.9
0.7

7.7

0.9

1.6

1.7

2.1
3.7

SP

1.7

1.3

2.0
3.5
3.2

1.3

0.0

0.4

-0.4
0.9

7.5

0.8

1.6

1.7

2.1
4.4

Note:
1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme 
scenario using the commonly agreed methodology.

Source :

Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

38 

 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

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:

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 balance

2

3
Structural balance (SB)
Change in SB

Two year average change in SB 

Structural primary balance
Change in structural primary balance

3

Expenditure benchmark

Applicable reference rate

4

5

Deviation
Two-year average deviation (% GDP)

 (% GDP)

2012

2013

2014

2015

2016

COM COM

50.8

51.1

12.9

16.4

17.0

4.5

54.7

12.8

16.6

17.1

4.6

54.1

SP

51.3

12.9

16.8

16.9

4.7

53.8

1
COM

51.0

12.8

16.9

16.9

4.4

54.2

SP

51.1

12.9

17.3

16.8

4.1

53.0

SP

51.7

12.9

17.7

16.8

4.3

52.2

SP

52.1

13.0

18.1

16.8

4.2

51.6

51.3

50.9

50.5

50.9

49.9

49.1

48.6

16.5

16.4

16.4

16.2

16.0

15.7

15.5

25.8

26.4

26.3

26.7

26.1

25.9

25.8

2.7

1.7

4.6

3.4

-3.9

-0.5

-0.3

-3.6

-1.1

-3.4

-3.0

0.5

0.2

0.4

0.40

-0.4

0.4

2.7

1.6

3.7

3.2

-2.9

0.3

0.4

-3.3

-1.9

-1.9

-2.3

0.7

0.6

0.9

0.5

0.40

-1.2

-0.8

2.5

1.6

3.8

3.3

-2.5

0.8

0.3

-2.8

-1.9

-1.4

-1.7

1.3

0.9

1.6

1.1

0.40

-1.8

-1.0

2.7

1.6

3.8

3.2

-3.1

0.1

0.0

-3.1

-1.5

-2.3

-2.3

0.0

0.4

0.9

0.0

0.17

0.7

-0.2

2.5

1.5

3.8

3.1

-2.0

1.2

0.0

-2.0

-1.4

-1.2

-1.2

0.5

0.9

1.9

0.3

0.17

-0.1

-0.9

2.5

1.5

3.6

3.1

-0.5

2.5

0.0

-0.5

-0.9

0.0

0.0

1.2

0.9

3.1

1.2

0.17

-0.9

-0.5

2.4

1.5

3.5

3.0

0.4

3.4

0.0

0.4

-0.4

0.6

0.6

0.6

0.9

3.6

0.5

0.17

-0.3

-0.6

Change: 
2012-2016
SP

1.3

0.1

1.7

-0.2

-0.3

-3.1

-2.7

-1.0

0.0

-0.3

-0.2

-1.1

-0.4

4.3

3.9

0.3

4.0

0.6

4.0

3.7

-

-

3.2

-

-

-

-

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 programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
to 2014 onwards have been updated in 2013. 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 
applicable reference rate. The expenditure aggregate used for the expenditure benchmark is obtained following the commonly agreed 
methodology. A positive sign implies that expenditure growth exceeds the applicable reference rate. 

Source :

Stability programme (SP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

39 

 
 
Average
2007-2011

92.4

2.0

-0.8

1.0

3.6

-0.9

-1.7

1.8

Table IV. Debt dynamics 

(% of GDP)

1
Gross debt ratio
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

Gap to the debt benchmark
7
Structural adjustment
To be compared to:

5,6

Required adjustment

8

Notes:

2012

99.6

1.8

0.5

1.6

3.4

0.2

-2.0

-0.3

2012

n.r.
n.r.

n.r.

2013

2014

COM

SP

COM

101.4

100.0

102.1

1.8

0.4

0.7

-0.3

1.6

3.2

0.0

-1.6

0.5

-0.8

1.4

3.3

-0.2

-1.8

-0.2

-0.1

0.4

3.2

-1.2

-1.6

0.4

2015
SP

96.5

-2.5

-2.5

0.0

3.0

-1.5

-1.5

0.1

2016
SP

93.0

-3.5

-3.4

-0.1

3.0

-1.6

-1.6

0.1

SP

99.0

-1.0

-1.2

0.1

3.2

-1.5

-1.6

0.1

2013

2014

2015

2016

COM / 
3

SP
n.r.
n.r.

4

SP

n.r.
n.r.

COM / 
3

SP
n.r.
0.5

4

SP

n.r.
0.5

n.r.

n.r.

0.1

0.2

SP

n.r.
1.2

0.0

SP

n.r.
0.6

-1.5

1End of period.
2The snow-ball 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, 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 for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of 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 for the previous years are achieved.

Source :

Stability programme (SP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

40 

 
 
 
Table V. Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

BE

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

6.9

0.3

6.6

4.0

0.3

1.9

0.4

5.2

0.5

2.5

2.1

4.3

-2.2

6.4

3.9

0.3

1.8

0.4

1.7

-3.1

2.3

2.4

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

0.30

99.6

28.0

:

87.0

25.8

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' 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.              
** The critical threshold for the S0 indicator is 0.44. 

Source : 
Commission services; 2013 stability programme.                                                                                                                               

(% of GDP)

160

Gross debt as % of GDP - BE - Medium term debt projections

140

120

100

80

60

40

20

0

0
9
9
1

2
9
9
1

4
9
9
1

6
9
9
1

8
9
9
1

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

2
2
0
2

4
2
0
2

6
2
0
2

8
2
0
2

0
3
0
2

COM no-policy change scenario

COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM consolidation scenario (0.5% per year on SB) in order to achieve MTO

COM consolidation scenario (1% per year on SB) in order to achieve MTO

SCP scenario

41 

 
 
 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

45.2

44.4

44.2

43.4

43.8

44.1

2002

2006

2008

2009

2010

2011

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

10.9

11.1

10.7

10.6

10.8

10.7

6.9

0.8

1.4

1.9

7.1

0.7

1.4

1.9

7.0

0.7

1.2

1.8

6.9

0.7

1.3

1.7

7.1

0.7

1.3

1.7

7.0

0.6

1.3

1.7

22.7

21.3

21.7

22.0

21.9

22.0

2.1

5.9

3.4

2.2

1.7

6.3

3.8

2.1

1.9

6.2

3.7

2.0

1.9

5.1

3.6

2.0

2.0

5.2

3.7

2.1

2.0

5.5

3.7

2.1

48.3

50.6

48.7

46.9

48.4

47.9

Note: 
1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.

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

3 The VAT efficiency is measured via the VAT revenue ratio. The 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 (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

42 

 
 
Table VII. Financial market indicators 

Total assets of the banking sector (% of GDP)

368.5

339.6

318.6

324.7

288.0

2008

2009

2010

2011

2012

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)
              - return on equity (%) 1), 2)
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)3)
Private debt (% of GDP)
Gross external debt (% of GDP)4)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

1) Latest data (September 2011).
2) After extraordinary items and taxes.
3) Covered countries are CY, EL, ES, LV, HU, IE, PT and RO.
4) Latest data 2012Q3.
* M easured in basis points.

Source :

80.8

26.8

1.7
16.2

-36.5

-0.2

-23.8

70.5

7.9

33.7

96.1

59.0
90.7

0.4

45.1

77.1

60.7

2.7
17.3

-2.7

-5.1

-8.1

65.2

3.9

21.9

94.4

61.2
91.7

0.7

66.1

74.9

…

2.8
19.3

10.7

-2.4

6.6

61.7

0.8

18.2

88.9

57.0
92.4

0.7

95.2

70.8

…

2.8
19.1

0.7

-1.4

-1.9

60.1

4.9

13.1

85.4

…

…

...
...

...

-1.2

6.0

56.6

4.0

9.7

84.3

51.4
106.2

1.6

56.9
107.8

1.5

173.3

125.3

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).

43 

 
 
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, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)

Long-term unemployment rate2 (% of labour force)

Youth unemployment rate 
(% of youth labour force aged 15-24)
Youth NEET rate (% of population aged 15-24)
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)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)

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)
Real unit labour cost growth (annual % change)

2007

2008

2009

2010

2011

2012

67.7

68.0

1.7

60.3

75.0

34.4

22.1

40.6

7.5

8.6

1.6

7.5

3.8

18.8

11.2

12.1

41.5

21.0

23.0

1.2

-0.4

1.6

1.0

2.2
-0.2

1.8

61.3

74.7

34.5

22.6

40.9

7.9

8.3

1.8

7.0

3.3

18.0

10.1

12.0

42.9

20.0

23.0

-0.8

0.5

-1.3

1.4

4.4
2.2

67.1

-0.2

61.0

73.2

35.3

23.4

41.5

8.6

8.2

2.6

7.9

3.5

21.9

11.1

11.1

42.0

17.0

16.0

-2.6

-1.2

-1.5

0.0

3.9
2.7

67.6

67.3

67.2

0.7

61.6

73.5

37.3

24.0

42.3

9.0

8.1

1.8

8.3

4.1

22.4

10.9

11.9

44.4

17.0

19.0

1.7

0.1

1.7

-0.6

-0.4
-2.3

1.4

61.5

73.0

38.7

25.1

43.4

9.8

9.0

2.5

7.2

3.5

18.7

11.8

12.3

42.6

19.0

20.0

0.4

1.7

-1.3

1.0

2.7
0.6

0.2

61.7

72.7

39.5

25.1

43.6

9.7

8.1

:

7.6

3.4

19.7

12.3

12.0

43.9

:

:

-0.4

0.0

-0.3

1.2

3.7
1.6

Notes:
1 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.

2 Long-term unemployed are unemployed persons for at least 12 months.

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

44 

 
 
 
 
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
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households 4 (% of 
people aged 0-59)
In-work at-risk-of poverty rate (% of persons employed)
Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices5
Gross disposable income (households)
Relative median poverty risk gap (60% of median equivalised 
income, age: total)

2006

2007

2008

2009

2010

7.20
1.89
10.60
2.02
3.41
0.13
25.71
1.09

7.23
1.83
10.22
2.07
3.26
0.14
25.50
1.23

7.47
1.94
10.81
2.07
3.30
0.23
26.54
1.36

8.10
2.10
11.63
2.22
3.83
0.25
28.91
1.45

8.01
2.13
11.25
2.19
3.79
0.22
28.40
1.45

2007

2008

2009

2010

2011

21.6

21.6

25.0

15.2

5.7

13.8

4.4

44.7

20.8

21.3

22.9

14.7

5.6

11.7

4.8

45.6

20.2

20.5

23.1

14.6

5.2

12.3

4.6

45.3

20.8

23.2

21.0

14.6

5.9

12.6

4.5

45.3

21.0

23.3

21.6

15.3

5.7

13.7

4.2

45.0

10540

10598

10892

10977

11028

202106

213195

217598

219389

224374

17.8

17.2

18.1

18.0

18.6

Notes:
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 household with zero or very low work intensity (LWI).
2 At-risk-of poverty rate (AROP): 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 (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

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

45 

 
 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

Policy indicators

Enforcing contracts 3 (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)

2003-
2007

1.3

3.4

1.6

2.8

2008

2009

2010

2011

2012

-0.8

-2.6

-0.2

-10.1

1.7

9.1

0.4

3.4

-0.4

-1.5

-3.0

16.4

-0.4

-5.0

n.a.

-1.8

-2.6

-0.2

2.9

0.4

323.8

304.4

299.8

288.4

n.a.

n.a.

2003-
2007
505

31

1.9

2008

2009

2010

2011

2012

505

4

2.0

505

4

2.0

505

4

2.0

505

4

2.0

505

4

n.a.

39.9

42.9

42.0

44.4

42.6

43.2

5.97

6.43

6.57

6.57

n.a.

n.a.

2007

2008

2009

2010

2011

2012

n.a.

n.a.

1.4

3.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1.8

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force

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 Energy, Transport and Communications Regulation (ETCR).
*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). 

46 

 
 
 
Table X. Green Growth 

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

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

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

%
HHI
HHI
%

2002-
2006

0.22
0.54
0.69
n.a.
-3.3%
n.a.
n.a.
9.3%
5.0%

0.24

11.2
n.a.
n.a.
n.a.
n.a.
85.2%
n.a.
n.a.
n.a.

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

2007

2008

2009

2010

2011

0.20
0.46
0.64
n.a.
-3.7%
10
-2.2
9.1%
4.8%

0.23

10.8
0.09
0.03
0.01%
0.02%
88.8%
39.5%
0.41
1.10

77.1%
0.20
0.28
2.7%

0.20
0.47
0.64
0.17
-5.4%
11
21.7
8.5%
4.5%

0.22

10.1
0.10
0.04
0.01%
0.01%
91.2%
40.6%
0.48
1.17

79.9%
0.15
0.29
3.1%

0.20
0.44
0.63
n.a.
-3.2%
11
-12.9
8.4%
4.6%

0.19
9.6
0.11
0.03
0.01%
0.02%
90.4%
37.1%
0.49
1.19

74.3%
0.15
0.30
3.9%

0.21
0.46
n.a.
0.22
-3.8%
11
4.7
8.8%
4.8%

0.22
n.a.
0.11
0.03
0.01%
0.02%
92.0%
38.0%
n.a.
n.a.

76.8%
0.17
0.29
4.2%

0.20
n.a.
n.a.
n.a.
-4.8%
11
14.6
n.a.
n.a.

n.a.

n.a.
0.11
0.03
0.01%
0.01%
n.a.
38.4%
n.a.
n.a.

72.9%
n.a.
0.27
4.8%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated 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 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
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 activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption 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 renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents

*Provisional data (15 April 213). Commission Services and EEA.

** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.

*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

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