Recommendation for a COUNCIL RECOMMENDATION on Belgium’s 2013 national reform programme and delivering a Council opinion on Belgium’s stability programme for 2012-2016
Date: 2013-05-29
Institutions: European Commission
Subjects: Belgium, VAT, budget deficit, budgetary equilibrium, competitiveness, reduction of gas emissions, retirement conditions, stability programme, tax reform, tertiary sector, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 351 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Belgium’s 2013 national reform programme  

and delivering a Council opinion on Belgium’s stability programme for 2012-2016 

{SWD(2013) 351 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Belgium’s 2013 national reform programme  

and delivering a Council opinion on Belgium’s stability programme for 2012-2016 

THE COUNCIL OF THE EUROPEAN UNION, 

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

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

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  on  the  prevention  and  correction  of  macroeconomic  imbalances2, 
and in particular Article 6(1) thereof, 
Having regard to the recommendation of the European Commission3, 
Having regard to the resolutions of the European Parliament4, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

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

On 13 July 2010, on the basis of the Commission's proposals, the Council adopted a 
recommendation  on  the  broad  guidelines  for  the  economic  policies  of  the  Member 
States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on 
guidelines  for  the  employment  policies  of  the  Member  States5,  which  together  form 
the  ‘integrated  guidelines’.  Member  States  were  invited  to  take  the  integrated 
guidelines into account in their national economic and employment policies. 

(3) 

On 29 June 2012, the Heads of State or Government decided on a Compact for Growth 
and  Jobs,  providing  a  coherent  framework  for  action  at  national,  EU  and  euro  area 

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OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
COM(2013) 351 final. 
P7_TA(2013)0052 and P7_TA(2013)0053. 
Council Decision 2013/208/EU of 22 April 2013. 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

levels using all possible levers, instruments and policies. They decided on action to be 
taken  at  the  level  of  the  Member  States,  in  particular  expressing  full  commitment  to 
achieving the objectives of the Europe 2020 Strategy and to implementing the country-
specific recommendations. 

On 6 July 2012, the Council adopted a recommendation on Belgium’s national reform 
programme  for  2012  and  delivered  its  opinion  on  Belgium’s  updated  stability 
programme for 2011-2015. 
On  28  November  2012,  the  Commission  adopted  the  Annual  Growth  Survey6, 
marking  the  start  of  the  2013  European  Semester  for  economic  policy  coordination. 
Also  on  28  November  2012,  the  Commission,  on  the  basis  of  Regulation  (EU)  No 
1176/2011,  adopted  the  Alert  Mechanism  Report7,  in  which  it  identified  Belgium  as 
one of the Member States for which an in-depth review would be carried out. 

On  14  March  2013,  the  European  Council  endorsed  the  priorities  for  ensuring 
financial stability, fiscal consolidation and action to foster growth. It underscored the 
need  to  pursue  differentiated,  growth-friendly  fiscal  consolidation,  to  restore  normal 
lending conditions to the economy, to promote growth and competitiveness, to tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration. 
On  10  April  2013,  the  Commission  published  the  results  of  its  in-depth  review8  for 
Belgium,  under  Article  5  of  Regulation  (EU)  No  1176/2011  on  the  prevention  and 
correction  of  macroeconomic  imbalances.  The  Commission’s  analysis  leads  it  to 
conclude  that  Belgium  is  experiencing  macroeconomic  imbalances,  which  deserve 
monitoring and policy action. In particular, macroeconomic developments in the areas 
of  external  competitiveness  of  goods,  and  indebtedness,  especially  concerning  the 
implications of the high level of public debt for the real economy, continue to deserve 
attention. 

On  29  April  2013,  Belgium  submitted  its  2013  stability  programme  covering  the 
period 2012-2016 and its 2013 national reform programme. In order to take account of 
their interlinkages, the two programmes have been assessed at the same time. 

Based  on  the  assessment  of  the  2013  stability  programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  the  macroeconomic 
scenario  underpinning  the  budgetary  projections  in  the  programme  is plausible.  In 
comparison to the Commission’s 2013 Spring Forecast, which projects GDP growth to 
be  flat  in  2013  and  to  increase  to  1.2%  in  2014,  it  is  slightly  more  optimistic 
(projecting  0.2%  and  1.5%,  respectively).  Since  2010,  Belgium  has  implemented 
consolidation  measures,  especially  in  2012,  and,  also  in  2012,  introduced  structural 
reforms in the pension system, the unemployment benefit system and product markets. 
However,  the  fiscal  effort  was  not  sufficient  to  be  in  line  with  the  Council 
recommendation  of  2  December  2009  to  end  the  excessive  deficit  situation.  Also  in 
light of the recapitalisation of the banking group Dexia, which had a negative impact 
of  0.8%  of  GDP  on  the  deficit  outcome,  and  the  worse  than  expected  economic 
developments in the second half of 2012, the deadline for correction of the excessive 
deficit  has  been  missed.  As  the  correction  of  the  excessive  deficit  by  2012  has  not 
been achieved, the deficit is now foreseen to be brought below 3% of GDP from 2013. 

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COM(2012) 750 final. 
COM(2012) 751 final. 
SWD(2013) 113 final. 

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The  objective  of  the  budgetary  strategy  outlined  in  the  programme  is  to  reach  a 
balanced budget in structural terms by 2015 and to achieve the medium-term objective 
(MTO) the year after. The programme has changed the MTO from a surplus of 0.5% 
to 0.75% of GDP. The new MTO is in line with the requirements of the Stability and 
Growth Pact. The programme is compatible with the new EDP deadline of 2013, but 
according  to  the  Spring  Forecast  the  safety  margin  against  breaching  the  Treaty 
reference  value  is  narrow,  with  a  deficit  projected  at  2.9%  of  GDP  in  2013.  The 
planned annual progress towards the MTO, which is projected to be reached by 2016, 
is  higher  than  0.5%  of  GDP  (in  structural  terms).  No  consolidation  measures  have 
been specified beyond 2013. According to the information provided in the programme, 
the  growth  rate  of  government  expenditure,  net  of  discretionary  revenue  measures, 
over  2014-2016  is  expected  to  contribute  to  an  annual  structural  adjustment  towards 
the MTO by 0.5% of GDP. 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. From 
2014  to  2016,  Belgium  can  be  expected  to  be  in  a  transition  period  regarding 
compliance with the debt criterion. According to the plans, the debt benchmark will be 
met  at  the  end  of  the  transition  period.  Based  on  the  Commission  2013  Spring 
Forecast, which projects the debt ratio to reach 101.4% in 2013 and to 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,  which  indicates  that  progress 
towards the MTO is not sufficient. The programme does not explain how the planned 
adjustment  will  be  shared  between  the  different  layers  of  government,  an  issue  also 
addressed in last year's country specific recommendation. In addition to a rules-based 
multi-annual framework for general government, it is necessary to design and agree on 
explicit  coordination  arrangements  to  secure  and  enforce  more  robust,  automatic 
commitments from the regions, communities and local authorities, to meet budgetary 
targets.  

(10)  Belgium  faces  a  very  significant  projected  increase  in  age-related  expenditure  (+2.0 
pps of GDP) already in the 2010-2020 period, in particular in the areas of pensions and 
long-term care. The initiated reform of old age social security is set to have a positive 
impact on the employment of older people. Nevertheless, forecasts show Belgium will 
fall  short  of  the  2020  target  it  set  for  itself  in  this  area.  Given  the  magnitude  of  the 
challenge, additional efforts will be required to close the gap between the effective and 
the  statutory  retirement  age.  Measures  to  link  the  statutory  retirement  age  to 
developments in life expectancy would make it possible to safeguard the sustainability 
of  the  pension  system  in  the  long  term.  The  need  to  achieve  financial  sustainability 
will  have  to  be  balanced  against  the  need  to  maintain  the  adequacy  of  the  old-age 
social  security  schemes.  In  long-term  care,  improved  cost-efficiency  of  public 
spending  on  long-term  care  services  and  cost-saving  measures  of  health  prevention 
and  rehabilitation,  and  for  the  creation  of  better  conditions  for  independent  living 
should  be  explored  in  the  light  of  the  relatively  high  cost  of  institutional  care  in 
Belgium. 

(11)  Belgium’s long term loss of competitiveness is caused by several factors, including the 
wage-setting  system,  malfunctions  in  the  markets  for  inputs,  and  non-cost  factors 
related to the innovation capacity of the economy. The wage norm of 1996, intended 
to  preserve  competitiveness  vis-à-vis  the  main  trading  partners,  has  not  always 
fulfilled its role. The immediate measures taken so far to bring wage evolutions more 
in line with productivity levels are steps in the right direction, but are not sufficient to 
ensure  long-term  compatibility  between  wage  and  productivity  developments. 
Structural  improvements  to  the  wage  bargaining  framework  are  still  needed:  these 

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include  automatic  corrections  in  case  the  wage  norm  is  not  respected  or  where  the 
health index increase exceeds wage increases in the main trading partners. The wage 
bargaining  system  should  ensure  that  wage  developments  follow  local  level 
productivity  dynamics.  Belgium  specialises  in  intermediate  products  for  which 
international  competition  is  severe,  making  it  difficult  to  include  in  the  end  price 
variations in input prices. While the strengths of the Belgian research and innovation 
system  have  played  a  mitigating  role  as  regards  cost-competitiveness  issue,  business 
R&D  remains  very  concentrated  and  broader  uptake  by  businesses  lags  behind.  The 
framework  conditions  for  speeding  up  the  transition  towards  a  more  knowledge-
intensive  economy  should  be  reinforced,  focusing  on  entrepreneurship,  facilitating 
firm dynamics and the formation of human capital. 

(12)  Prices  for  electricity,  gas  and  many  other  goods  and  services  are  higher  in  Belgium 
than  in  other  Member  States,  reflecting  weak  competition  and  structural  barriers. 
Prices  in  the  retail  sector  remain  above  the  euro-area  average,  while  restrictions  on 
professional  services  impede  the  development  of  innovative  business  models  and 
restrain  investment.  Belgium  has  made  only  limited  progress  on  improving 
competition in the network industries and the establishment of strong and independent 
regulators  remains  incomplete.  Belgium  has  the  second-lowest  rate  of  mobile 
broadband penetration in the EU, largely due to regulatory and coordination problems 
with  regards  to  spectrum  availability.  While  higher  consumer  switching  has 
diminished the dominance in generation of the traditional energy operator, competition 
at  retail  level  for  electricity  and  gas  and  at  wholesale  level  for  electricity  remains  a 
challenge with high distribution costs disproportionally contributing to net price levels 
for  industrial  users  when  compared  with  neighbouring  countries.  Belgium’s  decision 
to  control  end  user  retail  prices  for  electricity  and  gas  may  hamper  capacity 
investments and new market entry. Licensing conditions in the postal sector still raise 
concerns. Domestic rail passenger transport is not open to competition and port labour 
legislation  has  not  been  modernised.  Given  the  importance  of  all  of  the  above-
mentioned sectors for competitiveness, these measures are urgently needed. 

(13)  The  Belgian  taxation  system  relies  disproportionately  on  direct  taxes  and  contains 
loopholes that diminish its fairness. While Belgium has made some efforts to reduce 
the overall tax burden on labour, the implicit tax rate is still among the highest in the 
EU for most types of workers. Belgium continues to be one of the countries with the 
lowest  share  of  environmental  taxation  in  total  tax  revenues.  There  is  scope  for 
simplifying  the  tax  system  and  improving  its  efficiency,  including  by  reducing  and 
streamlining tax expenditures, as well as removing unjustified or ineffective reduced 
VAT rates. 

(14)  Belgium  suffers  from  below-average  and  stagnating  labour-market  participation  and 
high  employment  and  unemployment  disparities  across  regions  and  population 
subgroups.  The  population  groups  with  the  lowest  participation  in  the  labour  market 
include  those  with  a  migrant  background,  the  elderly  and  low-skilled  youth  in  all 
regions. These groups are also exposed to higher risks of poverty and social exclusion. 
The reform of the unemployment benefits system is a move in the right direction but 
does not in itself guarantee more effective matching of labour supply and demand if it 
is  not  associated  with  effective  job-search  assistance  and  training  opportunities.  The 
interaction  between  the  targeted  reductions  at  the  federal  level  and  the  employment 
support  schemes  implemented  by  the  regions  generates  considerable  complexity. 
Although the measures aimed at low-skilled youth are likely to also benefit migrants, 
an  encompassing  strategy  specifically  aimed  at  this  target  group  is  called  for.  In 

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addition,  it  would  seem  difficult  to  solve  certain  labour  mismatches  without 
significantly increasing interregional labour mobility. A more fundamental assessment 
is needed of how to make the provision of education and training more transparent and 
efficient and how to reinforce synergy between the different training providers. 

(15)  Projections for greenhouse gas emissions up until 2020 indicate that Belgium will fail 
to meet its 15 % reduction target. It remains unclear how the isolated initiatives taken 
by the different authorities will ensure that the target is met, or how the burden will be 
shared  between  the  regions.  The  impact  of  the  combined  measures  on  reducing 
emissions,  in  particular  from  the  transport  sector  and  buildings,  remains  unclear. 
Congestion is placing a heavy burden on the Belgian economy, estimated to be even as 
high as 2 % of GDP and one of the highest in Europe, but the implementation of the 
new traffic tax system in the three regions has been delayed until 2016.  

(16)  The coordination issues inherent in a highly regionalised structure put emphasis on an 
efficient  organisation  of  public  governance,  as  the  presence  of  multiple  networks, 
layers and actors may lead to duplication of structures with weakened governance and 
higher administrative costs. These issues come to the fore with regard to taxation and 
the  burden  sharing  of  budgetary  efforts  including  for  education  and  social  security, 
which requires in general more cooperation and coordination.  

(17) 

(18) 

(19) 

(20) 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Belgium’s  economic  policy.  It  has  assessed  the  stability 
programme and the national reform programme, and presented an in-depth review. It 
has  taken  into  account  not  only  their  relevance  for  sustainable  fiscal  and  socio-
economic  policy  in  Belgium  but  also  their  compliance  with  EU  rules  and  guidance, 
given the need to reinforce the overall economic governance of the European Union by 
providing EU-level input into future national decisions. Its recommendations under the 
European Semester are reflected in recommendations (1) to (7) below. 

In  the  light  of  this  assessment,  the  Council  has  examined  Belgium’s  stability 
programme, and its opinion9 is reflected in particular in recommendation (1) below. 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  Belgium’s  national  reform  programme  and  the  stability  programme.  Its 
recommendations under Article 6 of Regulation (EU) No 1176/2011 on the prevention 
and  correction  of  macroeconomic  imbalances  are  reflected  in  recommendations  (1), 
(2), (3), (4) and (5) below. 

In  the  context  of  the  European  Semester  the  Commission  has  also  carried  out  an 
analysis of the economic policy of the euro area as a whole. On this basis the Council 
has issued specific recommendations addressed to the Member States whose currency 
is  the  euro.  Belgium  also  should  ensure  the  full  and  timely  implementation  of  these 
recommendations, 

HEREBY RECOMMENDS that Belgium should take action within the period 2013-2014 to: 

1. 

Adopt additional measures to achieve the structural adjustment effort specified in the 
Council  Decision  to  give  notice  to  correct  the  excessive  deficit  by  2013  and  to 
enhance the sustainability and credibility of the consolidation. A durable correction 
of the fiscal imbalances requires the credible implementation of ambitious structural 
reforms  which  would  increase  the  adjustment  capacity  and  boost  potential  growth. 
After  the  correction  of  the  excessive  deficit,  pursue  the  structural  adjustment  at  an 

9 

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

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appropriate pace so as to reach the medium-term objective by 2016 and ensure that 
the  high  debt  ratio  is  put  on  a  firm  downward  path.  To  this  end,  present  growth-
friendly structural measures for 2014 by 15 October 2013 which ensure a sustainable 
correction  of  the  excessive  deficit  and  sufficient  progress  towards  its  medium-term 
objective. Ensure that the adjustment path is balanced over time or even front-loaded. 
Adopt  explicit  coordination  arrangements  to  ensure  that  budgetary  targets  are 
binding  at  federal  level  and  sub-federal  levels  within  a  medium-term  planning 
perspective  including  through  the  prompt  adoption  of  a  rule  on  the  general 
government budget balance/surplus that complies with the requirements of the Treaty 
on  Stability,  Coordination  and  Governance  in  the  Economic  and  Monetary  Union 
and  to  increase  the  transparency  of  burden  sharing  and  accountability  across 
government layers. 

Step  up  efforts  to  close  the  gap  between  the  effective  and  statutory  retirement  age, 
including by quickly phasing out early-exit systems. Underpin reforms of the old-age 
social  security  systems  with  employment-support  measures  and  labour-market 
reforms conducive to active ageing. Accelerate the adoption of a decision to link the 
statutory retirement age to life expectancy. Continue to improve the cost-efficiency 
of public spending on long term institutional care. 

To  restore  competitiveness,  pursue  the  on-going  efforts  to  reform  the  wage  setting 
system,  including  wage  indexation;  in  particular,  by  taking  structural  measures,  in 
consultation  with  the  social  partners  and  in  accordance  with  national  practice,  to 
ensure  that  wage  setting  is  responsive  to  productivity  developments,  reflects  local 
differences  in  productivity  and  labour  market  conditions,  and  provides  automatic 
corrections when wage evolution undermines cost-competitiveness.  

Present concrete and time-specific structural measures to improve competition in the 
services  sector,  by  removing  barriers  in  retail  and  excessive  restrictions  in 
professional  services  and  improve  the  provision  of  mobile  broadband.  Continue  to 
improve  the  functioning  of  the  energy  sector  by  reducing  distribution  costs  and 
monitoring retail costs, strengthen the independence of the regulators in the energy, 
telecoms  and  the  transport  sectors  (railway,  airport,  ports,  road  transport).  Remove 
remaining regulatory barriers in the postal sector. 

Establish concrete and time-specific proposals for shifting taxes from labour to less 
growth-distortive  tax  bases,  notably  by  exploring  the  potential  of  environmental 
taxes,  for  example  on  diesel,  heating  fuels  and  the  taxation  of  the  private  use  of 
company  cars.  Simplify  the  tax  system  by  reducing  tax  expenditures  in  income 
taxation,  increasing  VAT  efficiency  and  improving  tax  compliance  by  closing 
existing loopholes. 

Further reduce disincentives to work by ensuring effective enforcement of job-search 
requirements  and  personalised  job  search  assistance  for  all  unemployed.  Take 
measures to increase interregional labour mobility. Simplify and reinforce coherence 
between  employment  incentives,  activation  policies,  labour  matching,  education, 
lifelong learning and vocational training policies for older people and youth. Develop 
comprehensive social-inclusion strategies for people with a migrant background. 

Take concrete measures and agree a clear division of tasks between the federal and 
regional  authorities  to  ensure  progress  towards  reaching  the  targets  for  reducing 
greenhouse gas emissions from non-ETS activities, in particular from transport and 
buildings.  

2. 

3. 

4. 

5. 

6. 

7. 

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Done at Brussels,  

For the Council 
The President 

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