Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Belgium
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Belgium, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 201 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Belgium {SWD(2025) 201 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies of Belgium 

THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29 April  2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

General considerations 

(1) 

Regulation (EU) 2024/1263, which entered into force on 30 April 2024, specifies the 
objectives  of  the  economic  governance  framework,  which  aims  at  promoting  sound 
and  sustainable  public  finances  and  sustainable  and  inclusive  growth  and  resilience 
through reforms and investments, and preventing excessive government deficits. The 
Regulation  stipulates  that  the  Council  and  the  Commission  conduct  multilateral 
surveillance in the context of the European Semester in accordance with the objectives 
and requirements set out in the TFEU. The European Semester includes, in particular, 
the  formulation,  and  the  surveillance  of  the  implementation  of  country-specific 
recommendations.  The  Regulation  also  promotes  national  ownership  of  fiscal  policy 
and  emphasises  its  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State must submit to  the Council and the Commission  a 
national  medium-term  fiscal-structural  plan,  containing  its  fiscal,  reform  and 
investment  commitments,  over  4  or  5  years,  depending  on  the  length  of the  national 
legislative  term.  The  net  expenditure2  path  in  these  plans  has  to  comply  with  the 

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OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
Net  expenditure  as  defined  in  Article  2,  point  (2),  of  Regulation  (EU)  2024/1263:  ‘net  expenditure’ 
means government expenditure net of (i) interest expenditure; (ii) discretionary revenue measures; (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  revenue  from  Union  funds;  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union;  (v)  cyclical  elements  of 
unemployment benefit expenditure; and (vi) one-offs and other temporary measures. 

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(2) 

(3) 

(4) 

Regulation’s  requirements,  including  the  requirements  to  put  or  keep  general 
government debt on a plausibly downward path by the end of the adjustment period, or 
for it to remain at prudent levels below 60% of gross domestic product (GDP), and to 
bring  and/or  maintain  the  general  government  deficit  below  the  3%-of-GDP  Treaty 
reference value over the medium term. Where a Member State commits to a relevant 
set  of  reforms  and  investments  in  accordance  with  the  criteria  set  out  in  the 
Regulation, the adjustment period may be extended by up to three years. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility  (the  ‘RRF’),  entered  into  force  on 
19 February 2021.  The  RRF  provides  financial  support  to  Member  States  for 
implementing  reforms  and  investments,  delivering  a  fiscal  impulse  financed  by  the 
Union.  In  line  with  the  priorities  of  the  European  Semester  for  economic  policy 
coordination, the RRF fosters economic and social recovery while driving sustainable 
reforms and investments, in particular promoting the green and digital transitions and 
making  Member  States’  economies  more  resilient.  It  also  helps  strengthen  public 
finances  and  boost  growth  and  job  creation  in  the  medium  and  long  term,  improve 
territorial cohesion within the Union and support the continued implementation of the 
European Pillar of Social Rights. 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council4  (the 
‘REPowerEU  Regulation’),  which  was  adopted  on  27 February 2023,  aims  to  phase 
out the Union’s dependence on Russian fossil fuel imports. This helps achieve energy 
security  and  diversify  the  Union’s  energy  supply,  while  increasing  the  uptake  of 
renewables,  energy  storage  capacities  and  energy  efficiency.  Belgium  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On 30 April 2021, Belgium submitted its national recovery and resilience plan to the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to Article 19 of that Regulation, the Commission assessed the relevance, effectiveness, 
efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in  accordance  with  the 
assessment guidelines set  out  in  Annex V.  On  13 July  2021, the Council adopted its 
Implementing Decision approving the assessment of the recovery and resilience plan 
for Belgium5, which was amended under Article 18(2) on 8 December 2023 to update 
the maximum financial contribution for non-repayable financial support, as well as to 
include  the  REPowerEU  chapter6.  The  release  of  instalments  is  conditional  on  the 
adoption  of  a  decision  by  the  Commission,  in  accordance  with  Article 24(5),  stating 
that Belgium has satisfactorily achieved the relevant milestones and targets set out in 
the  Council  Implementing  Decision.  Satisfactory  achievement  requires  that  the 

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the  Recovery  and  Resilience  Facility 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
establishing 
(OJ  L  57,  18.2.2021,  p. 17,  ELI: 
http://data.europa.eu/eli/reg/2021/241/oj). 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27 February 2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No 1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1, ELI: http://data.europa. eu/eli/reg/2023/435/oj). 
Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Belgium (10161/2021). 
Council Implementing Decision of  8 December 2023 amending the Implementing Decision of  13 July 
2021 on the approval of the assessment of the recovery and resilience plan for Belgium (15570/2023). 

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achievement  of  preceding  milestones  and  targets  for  the  same  reform  or  investment 
has not been reversed. 

On  [Date]  the  Council,  upon  the  recommendation  of  the  Commission,  adopted  a 
recommendation  endorsing  the  national  medium-term  fiscal-structural  plan  of 
Belgium7.  The  plan  was  submitted  in  accordance  with  Article  11  and  Article  36(1), 
point (a), of Regulation (EU) 2024/1263, covers the period from 2025 until 2029 and 
presents a fiscal adjustment spread over seven years. 

On  26 November  2024,  on  the  basis  of  Regulation  (EU)  No 1176/2011,  the 
Commission  adopted  the  2025  Alert  Mechanism Report,  in  which  it  did  not  identify 
Belgium as one of the Member States for which an in-depth review would be needed. 
The  Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on 
the economic policy of the euro  area and  a proposal  for the 2025 Joint  Employment 
Report,  which  analyses  the  implementation  of  the  Employment  Guidelines  and  the 
principles  of  the  European  Pillar  of  Social  Rights.  The  Council  adopted  the 
Recommendation on the economic policy of the  euro  area8 on 13 May 2025 and the 
Joint Employment Report on 10 March 2025. 

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic framework that aims to boost the EU’s global competitiveness over the next 
five  years.  It  identifies  the  three  transformative  imperatives  of  sustainable  economic 
growth: (i) innovation; (ii) decarbonisation and competitiveness; and (iii) security. To 
close  the  innovation  gap,  the  EU  aims  to  foster  industrial  innovation,  support  the 
growth of start-ups through initiatives like the EU Start-up and Scale-up Strategy, and 
promote the adoption of advanced technologies like artificial intelligence and quantum 
computing.  In  pursuit  of  a  greener  economy,  the  Commission  has  outlined  a 
comprehensive Affordable Energy Action Plan and a Clean Industrial Deal, ensuring 
that  the  shift  to  clean  energy  remains  cost-effective,  competitiveness-friendly, 
particularly  for  energy-intensive  sectors,  and  is  a  driver  for  growth.  To  reduce 
excessive dependencies and increase security, the Union is committed to strengthening 
global  trade  partnerships,  diversifying  supply  chains  and  securing  access  to  critical 
raw materials and clean energy sources. These priorities are underpinned by horizontal 
enablers, namely regulatory simplification, deepening of the single market, financing 
competitiveness and a Savings and Investments Union, promotion of skills and quality 
jobs, and better coordination of EU policies. The Competitiveness Compass is aligned 
with  the  European  Semester,  ensuring  that  Member  States’  economic  policies  are 
consistent with the Commission’s strategic objectives, creating a unified approach to 
economic governance that fosters sustainable growth, innovation and resilience across 
the Union. 

In  2025,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  implementation  of  the  RRF.  The  full  implementation  of  the 
recovery and resilience plans remains essential for delivering on the policy priorities 
under the European Semester, as the plans help effectively address all or a significant 
subset  of  challenges  identified  in  the  relevant  country-specific  recommendations 

Council Recommendation of [Date] 2025 endorsing the medium-term fiscal-structural plan of Belgium, 
OJ C/2025/[xxx/xxx], [dd.mm].2025. 
Council Recommendation of 13 May 2025 on the economic policy of the euro area (OJ C, 
C/2025/2782, 22.5.2025, ELI: http://data.europa.eu/eli/C/2025/2782/oj). 

(5) 

(6) 

(7) 

(8) 

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issued  in  recent  years.  These  country-specific  recommendations  remain  equally 
relevant  for  the  assessment  of  amended  recovery  and  resilience  plans  in  accordance 
with Article 21 of Regulation (EU) 2021/241. 

(9) 

The  2025  country-specific  recommendations  cover 
the  key  economic  policy 
challenges that are not sufficiently addressed by measures included in the recovery and 
resilience  plans,  taking  into  account  the  relevant  challenges  identified  in  the  2019-
2024 country-specific recommendations. 

(10)  On  4  June  2025,  the  Commission  published  the  2025  country  report  for  Belgium.  It 
assessed  Belgium’s  progress 
relevant  country-specific 
in  addressing 
recommendations  and  took  stock  of  Belgium’s  implementation  of  the  recovery  and 
resilience plan. Based on this analysis, the country report identified the most pressing 
challenges Belgium is facing. It also assessed Belgium’s progress in implementing the 
European  Pillar  of  Social  Rights  and  in  achieving  the  Union  headline  targets  on 
employment, skills and poverty reduction, as well as progress in achieving the United 
Nations Sustainable Development Goals. 

the 

Assessment of the Annual Progress Report 

(11)  On  [date],  the  Council  recommended  the  following  maximum  growth  rates  of  net 
expenditure  for  Belgium:  3.6%  in  2025,  2.5%  in  2026,  2.5%  in  2027,  2.1%  in  2028 
and  2.1%  in  2029,  which  correspond  to  the  maximum  cumulative  growth  rates 
calculated by reference to 2024 of 3.6% in 2025, 6.1% in 2026, 8.8% in 2027, 11.1% 
in  2028  and  13.4%  in  2029.  In  2025-2029,  these  maximum  growth  rates  of  net 
expenditure  coincide  with  the  corrective  path  in  accordance  with  Article  3(4)  of 
Regulation 1467/97, as recommended by the Council on [date] with a view to bringing 
an  end  to  the  situation  of  an  excessive  deficit9  and  has  replaced  the  Council 
recommendation of 21 January 2025 with a view to bringing an end to the situation of 
an  excessive  deficit.10  On  30  April  2025  Belgium  submitted  its  Annual  Progress 
Report11  on  action  taken  in  response  to  the  Council  recommendation  of  21  January 
2025  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive  deficit,  the 
implementation  of  the  set  of  reforms  and  investments  underpinning  the  extension  of 
the adjustment period and the implementation of reforms and investments responding 
to  the  main  challenges  identified  in  the  European  Semester  country-specific 
recommendations.  The  Annual  Progress  Report  also  reflects  Belgium’s  biannual 
reporting  on  the  progress  made  in  achieving  its  recovery  and  resilience  plan  in 
accordance with Article 27 of Regulation (EU) 2021/241. 

(12)  Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  recommended  to 
activate the national  escape clause of the  Stability and Growth Pact  in  a coordinated 
manner to support the EU efforts to achieve a rapid and significant increase in defence 
spending and this proposal was welcomed by the European Council of 6 March 2025. 
Following the request of Belgium on 30 April 2025, on [date] the Council, upon the 
recommendation of the Commission, adopted a recommendation allowing Belgium to 

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Council recommendation of [date] with a view to bringing an end to the situation of an excessive deficit 
in Belgium, C/2025/[6xx/xxx]. 
Council  recommendation  of  21  January  2025  with  a  view  to  bringing  an  end  to  the  situation  of  an 
excessive deficit in Belgium, C/2025/5032. 
The  2025  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en 

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deviate  from,  and  exceed,  the  recommended  maximum  growth  rates  of  net 
expenditure12. 

(13)  Based on data validated by Eurostat13, Belgium’s general government deficit increased 
from 4.1% of GDP in 2023 to 4.5% in 2024, while the general government debt rose 
from 103.2% of GDP at the end of 2023 to 104.7% at the end of 2024. According to 
the  Commission’s  calculations,  these  developments  correspond  to  a  net  expenditure 
growth rate of 4.2% in 2024. In the Annual Progress Report, Belgium estimates the net 
expenditure growth in 2024 at 3.9%. Based on the Commission’s estimates, the fiscal 
stance14,  which  includes  both  nationally  and  EU  financed  expenditure,  was 
expansionary, by 0.4% of GDP, in 2024. 

(14)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the budgetary projections by Belgium expects real GDP growth at 1.2% in 2025, while 
HICP  inflation  is  projected  at  2.8%  in  2025.  The  Commission  Spring  2025  Forecast 
projects real GDP to grow by 0.8% in 2025 and 0.9% in 2026, and HICP inflation to 
stand at 2.8% in 2025 and 1.8% in 2026.  

(15) 

to 

In the Annual Progress Report, the general government deficit is expected to increase 
to  5.5%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
increase  to  107.2%  by  the  end  of  2025.  These  developments  correspond  to  net 
expenditure growth of 6.0% in 2025. The Commission Spring 2025 Forecast projects a 
general  government  deficit  of  5.4%  of  GDP  in  2025.  The  increase  of  the  deficit  in 
2025 mainly reflects higher expenditure on ageing-related costs, defence and interest 
these  developments 
payments.  According 
correspond  to  a net  expenditure growth  of 5.0% in  2025. These lower projections of 
net expenditure growth than in the Annual Progress Report are due to lower projected 
expenditure  growth  in  gross  fixed  capital  formation  and  intermediate  consumption, 
and a smaller impact of discretionary revenue-reducing measures in the Commission’s 
forecast. Based on the Commission’s estimates, the fiscal stance, which includes both 
nationally and EU financed expenditure, is projected to be expansionary, by 0.4% of 
GDP, in 2025. The general government debt-to-GDP ratio is set to increase to 107.1% 
by the end of 2025. The increase of the debt-to-GDP ratio in 2025 mainly reflects the 
persistence of a high general government deficit. 

the  Commission’s  calculations, 

(16)  General  government  expenditure  amounting  to  0.1%  of  GDP  is  expected  to  be 
financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  0.1%  of  GDP  in  2024,  according  to  the  Commission 
Spring 2025 Forecast. Expenditure financed by Recovery and Resilience Facility non-
repayable support enables high-quality investment and productivity-enhancing reforms 
without a direct impact on the general government balance and debt of Belgium.  

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Council  Recommendation  allowing  Belgium  to  deviate  from,  and  exceed,  the  recommended  net 
expenditure path (Activation of the national escape clause), 04.06.2025, COM(2025)600 final. 
Eurostat-Euro Indicators, 22.4.2025. 
The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure net of discretionary revenue measures and including expenditure financed by non-repayable 
support (grants) from the Recovery and Resilience Facility and other Union funds. 

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(17)  General  government  defence  expenditure  in  Belgium  amounted  to  0.9%  of  GDP  in 
2021,  1.0%  of  GDP  in  2022  and  0.9%  of  GDP  in  202315.  According  to  the 
Commission  Spring  2025  Forecast,  expenditure  on  defence  is  projected  at  1.3%  of 
GDP  in  2024  and  1.7%  of  GDP  in  2025.  This  corresponds  to  an  increase  of  0.8 
percentage  points  of  GDP  compared  to  2021.  The  period  when  the  national  escape 
clause is activated (2025-2028) allows Belgium to reprioritise government expenditure 
or increase government revenue so that lastingly higher defence expenditure would not 
endanger fiscal sustainability in the medium term. 

(18)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Belgium  is 
projected to grow by 5.0% in 2025.  Based on the Commission Spring 2025 Forecast, 
the net expenditure growth of Belgium in 2025 is projected to be above the maximum 
growth  rate  to  be  established  by  the  corrective  path  recommended  by  the 
Commission., corresponding to a deviation16 of 0.7% of GDP. However, the projected 
deviation  is  within  the  flexibility  of  the  national  escape  clause  based  on  current 
projections for defence spending.  

(19)  The  Annual  Progress  Report  does  not  include  budgetary  projections  beyond  2025. 
Based on policy measures known at the cut-off date of the forecast, the Commission 
Spring 2025 Forecast projects a general government deficit of 5.5% of GDP in 2026. 
The increase of the deficit in 2026 mainly reflects higher interest expenditure. These 
developments  correspond  to  net  expenditure  growth  of  3.0%  in  2026.  Based  on  the 
Commission’s  estimates,  the  fiscal  stance,  which  includes  both  nationally  and  EU 
financed expenditure, is projected to be contractionary, by 0.3% of GDP, in 2026. The 
general government debt-to-GDP ratio is projected by the Commission to increase to 
109.8%  by  the  end  of  2026.  The  increase  of  the  debt-to-GDP  ratio  in  2026  mainly 
reflects the persistence of a high general government deficit.  

(20)  The recommendation endorsing the medium-term plan of Belgium specifies the set of 
reforms and investments underpinning the extension of the adjustment period, together 
with  a  timeline  for  their  implementation.  They  include  existing  and  stepped-up 
measures from the recovery and resilience plan, such as the pension reform and public 
spending  reviews,  as  well  as  additional  reforms  and  investments  such  as,  labour 
market  reforms,  tax  reform,  budgetary  coordination  and  business  environment  and 
regulation. The reforms and investments underpinning an extension are all due after 30 
April 2025. 

(21)  Long-term  fiscal  sustainability  risks  are  high  in  Belgium17.  In  addition  to  the 
unfavourable  initial  budgetary  position,  pension  expenditure  is  projected  to  increase 
by 3.5 percentage points of GDP over the period 2022-2070, against the EU average of 
0.4 percentage points of GDP, according to the Commission’s 2024 Ageing Report18. 
Belgium’s  recovery  and  resilience  plan  includes  a  pension  reform  that  aims  to  help 
address  this  challenge,  alongside  other  objectives  such  as  improving  the  social 
sustainability of the system, incentivising people to remain active on the labour market 
after meeting early retirement conditions and ensuring a greater degree of convergence 

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Eurostat, government expenditure by classification of functions of government (COFOG).  
From  2026  these  figures  will  appear  in  the  control  account  that  is  established  in  Article  22  of  the 
Regulation (EU) 2024/1263. 
European Commission, 2024, Debt Sustainability Monitor. 
European  Commission  and  Economic  Policy  Committee,  2024  Ageing  Report,  available  at: 
https://economy-finance.ec.europa.eu/publications/2024-ageing-report-economic-andbudgetary-
projections-eu-member-states-2022-2070_en. 

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between and within pension systems. As part of its medium-term fiscal-structural plan 
and  to  underpin  an  extension  of  the  fiscal  adjustment  period,  Belgium  committed  to 
implementing a reform addressing this challenge. 

(22)  Labour taxes (personal income taxes and social contributions) are one of the highest in 
the EU at all income levels, which creates financial disincentives to work. For second 
earners, specific tax features like the ‘marital quotient’19 lead to shorter working hours 
or  unemployment.  The  high  tax  burden  on  labour  is  offset  by  many  wage  subsidies, 
creating  economic  inefficiencies  and  making  the  tax  system  complex.  Moreover, 
revenues from consumption taxes are below the EU average, due to the extensive use 
of  VAT  exemptions  and  reduced  rates.  The  design  of  capital  taxation  distorts 
investment  behaviour  by  creating  tax-induced  over-investment  in  certain  types  of 
assets.  Shifting the tax burden away from  labour to  other tax bases and  reducing the 
use of tax expenditure could help increase the efficiency of the tax system and reduce 
disincentives  to  work.  As  part  of  its  medium-term  fiscal-structural  plan  and  to 
underpin  an  extension  of  the  fiscal  adjustment  period,  Belgium  committed  to 
implementing  some  measures  that  will  result  in  some  progress  in  addressing  the 
taxation challenge. 

(23)  The design of social benefits discourages people from taking up work or from working 
more  hours.  Many  social  benefits  are  status-dependent  and  not  means-tested, 
hampering the efficiency of the benefits system. Unemployment benefits are unlimited 
in  time  and  not  means-tested  for  the  long-term  unemployed,  which  exacerbates  the 
unemployment trap. Reforming the design of the social benefit system and increasing 
its  transparency  could  increase  the  incentives  to  work.  As  part  of  its  medium-term 
fiscal-structural  plan  and  to  underpin  an  extension  of  the  fiscal  adjustment  period, 
Belgium committed to implementing a reform to tackle the social benefits challenge. 

(24)  The composition and efficiency of public spending can be improved to create space for 
more public investment, which would also benefit from improved project preparation. 
Despite  some  measures  taken  by  all  levels  of  government  under  the  recovery  and 
resilience plan, total public spending as a share of GDP in Belgium remains among the 
highest  in  the  euro  area.  This  suggests  that  there  is  scope  for  more  spending-based 
fiscal  adjustment,  for  instance  by  adopting  compulsory  saving  targets.  Spending 
reviews and policy evaluations can help Belgium prioritise and improve the efficiency 
of public spending. As part of its medium-term fiscal-structural plan and to underpin 
an  extension  of  the  fiscal  adjustment  period,  Belgium  committed  to  implementing 
some  measures  that  will  result  in  some  progress  in  addressing  the  public  spending 
challenge. 

(25)  Effective budgetary coordination is essential in a federal Member State like Belgium, 
where  a  large  share  of  the  spending  power  has  been  devolved  to  sub-national 
governments.  There  is  still  no  formal  agreement  on  multiannual  budgetary  targets  at 
all levels  of government,  despite the cooperation agreement  signed in  2013,  and this 
complicates budget coordination. As part of its medium-term fiscal-structural plan and 
to  underpin  an  extension  of  the  fiscal  adjustment  period,  Belgium  committed  to 
implementing a reform to tackle the budget coordination challenge. 

19 

Belgium  applies  an  income-splitting  system  (‘marital  quotient’)  which  allows  the  earning  partner  to 
attribute a proportion of his/her professional income to the non-earning partner. 

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Key policy challenges 

(26)  Public  spending  on  long-term  care  amounted  to  2.3%  of  GDP  in  2022  (EU  average 
1.7%), which made Belgium one of the countries with the highest spending on long-
term care in the EU, according to the Commission’s 2024 Ageing Report20. By 2070, 
long-term care expenditure is projected to increase by 1.7 percentage points of GDP, 
against an EU average increase of 0.8 percentage points, increasing risks to the long-
term  fiscal  sustainability  risks  in  Belgium.  Available  data  suggest  that  the  share  of 
individuals who are independent or mildly dependent on care and living in residential 
care facilities was high in  the Brussels Region and Wallonia. Moreover, the share of 
older people placed unnecessarily or at least prematurely in a residential care facility 
remains  high,  although  it  has  been  decreasing  over  the  last  decade.  The  federated 
government  authorities  have  started  reforms  to  make  the  use  of  the  different  care 
settings more cost-effective, particularly to avoid and delay unnecessary or premature 
use  of  residential  care.  These  measures  would  need  to  be  implemented  through 
impactful  actions,  notably  to  achieve  the  cost-effectiveness  of  certain  long-term  care 
options such as institutional care, while keeping access to care and services affordable. 

(27) 

In accordance with Article 19(3) point (b), of Regulation (EU) 2021/241 and criterion 
2.2  of  Annex  V  to  that  Regulation,  the  recovery  and  resilience  plan  includes  an 
extensive set  of mutually reinforcing  reforms and investments  to  be  implemented by 
2026.  These  are  expected  to  help  effectively  address  all  or  a  significant  subset  of 
challenges  identified  in  the  relevant  country-specific  recommendations.  Within  this 
tight timeframe, finalising the effective implementation of the recovery and resilience 
plan,  including  the  REPowerEU  chapter,  is  essential  to  boost  Belgium’s  long-term 
competitiveness  through  the  green  and  digital  transitions,  while  ensuring  social 
fairness. The systematic involvement of local and regional authorities, social partners, 
civil society and other relevant stakeholders remains essential in order to ensure broad 
ownership for the successful implementation of the recovery and resilience plan. 

(28)  The implementation  of  cohesion  policy  programmes, which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF) 
and the European Social Fund Plus (ESF+), has accelerated in Belgium. It is important 
to  continue  efforts  to  ensure  the  swift  implementation  of  these  programmes,  while 
maximising  their  impact  on  the  ground.  Belgium  is  already  taking  action  under  its 
cohesion policy programmes to boost competitiveness and growth. At the same time, 
Belgium  continues  to  face  challenges,  including  those  relating  to  competitiveness, 
regional  disparities,  including  in  regard  to  the  risk  of  poverty  and  social  exclusion, 
which in some regions is exacerbated by the situation on the housing market, access to 
employment  and  activation  measures,  skills  development  and  quality  education.  In 
accordance  with  Article  18  of  Regulation  (EU)  2021/1060,  Belgium  is  required  –  as 
part of the mid-term review of the cohesion policy funds – to review each programme 
taking into account, among other things, the challenges identified in the 2024 country-
specific  recommendations.  The  Commission  proposals  adopted  on  1  April  202521 
extend  the  deadline  for  submitting  an  assessment  –  for  each  programme  –  of  the 

20 

21 

European  Commission  and  Economic  Policy  Committee,  2024  Ageing  report,  available  at: 
https://economy-finance.ec.europa.eu/publications/2024-ageing-report-economic-andbudgetary-
projections-eu-member-states-2022-2070_en. 
Proposal  for  a  REGULATION  OF  THE  EUROPEAN  PARLIAMENT  AND  OF  THE  COUNCIL 
amending  Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address 
strategic challenges in the context of the mid-term review - COM(2025) 123 final. 

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outcome of the mid-term review beyond 31 March 2025. It also provides flexibilities 
to  help  speed  up  programme  implementation  and  incentives  for  Member  States  to 
allocate cohesion policy resources to five strategic priority areas of the Union, namely 
competitiveness  in  strategic  technologies,  defence,  housing,  water  resilience  and 
energy transition. 

(29)  The  Strategic  Technologies  for  Europe  Platform  (STEP)  provides  the  opportunity  to 
invest in a key EU strategic priority by strengthening the EU’s competitiveness. STEP 
is channelled through 11 existing EU funds. Member States can also contribute to the 
InvestEU  Programme  supporting  investments  in  priority  areas.  Belgium  could  use 
these initiatives to support the development or manufacturing of critical technologies, 
including clean and resource-efficient technologies. 

(30)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  Belgium  faces  several  additional  challenges  related  to 
innovation,  the  business  environment,  the  regulatory  and  administrative  burden  and 
complexity,  restrictions  in  the  service  sector,  the  decarbonisation  of  industry  and 
transport,  the  roll-out  of  renewables,  fossil  fuel  subsidies,  excessive  nitrogen 
deposition,  labour  shortages  and  skills  mismatches,  the  integration  of  disadvantaged 
groups into the labour market, the education system and the teaching profession. 

(31)  Although Belgium ranks as one of the EU’s innovation leaders and it has a high level 
of R&D intensity, Belgian R&D activity is concentrated in a few industries and large 
companies.  High levels  of tax relief fail to  reach companies  with  the highest  growth 
potential.  Stronger  performance  in  innovation  and  sustained  productivity  growth 
would  require  increasing  the  spread  of  knowledge  across  sectors  of  the  economy. 
There  seems  to  be  scope  for  improving  the  efficiency  and  effectiveness  of  public 
support for research and innovation, in particular in avoiding crowding-out effects and 
in better allocating resources to high-growth businesses. Moreover, the low rate of job 
mobility in Belgium, which may be due to factors such as high seniority pay and low 
pay transparency, also limits the spread of innovation to the rest of the economy. 

(32)  As  set  in  the  Competitiveness  Compass,  all  the  EU,  national,  and  local  institutions 
must  make  a  major  effort  to  produce  simpler  rules  and  to  accelerate  the  speed  of 
administrative  procedures.  The  Commission  has  set  ambitious  goals  for  reducing 
administrative burden: by at least 25% and by at least 35% for SMEs; and has created 
new  tools  to  achieve  these  goals,  including  systematic  stress  test  of  the  stock  of  EU 
legislation and enhanced stakeholders’ dialogue. To match this ambition, Belgium also 
needs  to  take  action.  71%  of  businesses  consider  the  complexity  of  administrative 
procedures  to  be  a  problem  for  their  company  when  doing  business  in  Belgium22. 
Belgium’s business  environment  is  impaired by  a high  regulatory burden and  a high 
level  of  complexity.  The  administrative  burden  on  firms  is  heavy,  particularly  in 
relation  to  tax  and  labour  laws.  The  costs  that  SMEs  face  in  complying  with  labour 
and  tax  systems  are  comparatively  high  in  Belgium,  in  particular  for  companies  that 
need to manage multiple regional systems. Moreover, Belgium has one of the lowest 
levels  of  business  dynamism  in  the  EU23.  Despite  a  recent  increase,  the  rate  of 
business  creation  remains  comparatively  low, notably for firms  with  employees. The 
share  of  high-growth  firms  in  Belgium  is  significantly  below  the  EU  average.  High 
trade  restrictions  in  the  service  sector  may  play  a  role  in  weakening  business 

22 
23 

‘Businesses' attitudes towards corruption in the EU’ Flash Report, Eurobarometer Report (April 2024) 
National Bank of Belgium, Competitiveness scoreboard indicators, 2024 report. 

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(33) 

dynamism.  Action  to  lift  the  restrictions  on  regulated  professions  would  also  be 
merited.  According to  the 2023-2024  Product  Market  Regulation, Belgium  has more 
restrictions on most professions, namely architects, accountants and real estate agents. 
Entry requirements remain especially high for these professions and for lawyers. 

In addition, electricity for industrial use is priced substantially higher in Belgium than 
gas.  Since  the  manufacturing  sector  generates  30%  of  Belgium’s  greenhouse  gas 
emissions, further incentives are needed to  decarbonise industrial processes and shift 
to cleaner energy. Fostering circular economy practices and sustainable supply chains 
could also help reduce industrial energy demand. Greenhouse gas emissions from the 
aviation  and  maritime  sectors,  including  fuel  consumption  related  to  international 
transport activities, are well above the EU average24. Rail transport is an insufficiently 
attractive option, both for passenger and freight transport, and the number of passenger 
cars  has  steadily  increased  leading  to  high  congestion  costs.  Differentiated  road 
charging for all types of vehicles, further investment in public transport and promoting 
car sharing and active mobility would make transport more sustainable. 

(34)  With a share of renewable energy in final energy consumption of only 14.7% in 2023, 
the roll-out of renewables is among the lowest in the EU. Belgium will need to make 
significant  efforts  to  reach  its  renewables  target  of  21.7%  by  2030,  which  remains 
below  Belgium’s  expected  contribution  to  the  EU  2030  target.  Although  grid 
congestion  related  to  solar  power  generation  has  become  a  serious  issue,  no  new 
onshore  grid  investments  were  announced.  In  addition,  Belgium’s  regulatory 
framework  still  hampers  the  development  of  flexible  resources  such  as  demand-side 
response and storage. Investing in grid infrastructure and speeding up permit-granting 
procedures would promote the roll-out of renewables. In addition, energy sharing, self-
consumption and demand-side flexibility could be promoted. Despite a relatively high 
share of nuclear in the energy mix, electricity prices for households are high compared 
to  gas  and  heating  oil  in  Belgium,  which  hinders  the  transition  to  electricity  and  the 
switch to greener heating systems. Shifting excise duties from electricity to heating oil 
and gas would make electricity more affordable than fossil fuels. 

(35)  Belgium  records  sizeable  fossil  fuel  subsidies,  which  it  does  not  plan  to  phase  out 
before 2030. A recent report by the Belgian authorities25 estimated federal direct fossil 
fuel subsidies to amount to EUR 12 billion (2.4% of GDP) in 2021. In particular, fossil 
fuel subsidies that neither tackle energy poverty in a targeted way nor genuine energy 
security  concerns,  hinder  electrification  and  are  not  crucial 
industrial 
competitiveness  could  be  considered  a  phase-out  priority.  In  Belgium,  fossil  fuel 
subsidies  such  as  reduced  excise  duties  on  fuel  oil  and  professional  diesel,  company 
fuel  cards  and reduced  VAT on gas are economically  inefficient,  perpetuate reliance 
on  fossil  fuels  and  do  not  contribute  to  Belgium’s  climate  commitments.  Fossil  fuel 
subsidies also hold back the energy renovation of buildings and Belgium risks failing 
to meet its renovation and energy efficiency targets for 2030. Stepping up the current 
level of investment in energy renovations and complementing investment with policy 
reforms to shift the incentives to energy renovation and low-carbon heating solutions 
would help accelerate the energy transition. 

to 

(36)  Water  quality  and  nature  degradation  are  major  causes  of  concern,  as  most  water 
bodies  in  Belgium  are  affected  by  diffuse  pollution  sources.  Declining  levels  of 

24 
25 

EU transport in figures: Statistical pocketbook 2024. 
FPS Finance (2024), Inventory of federal fossil-fuel subsidies. 

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biodiversity  put  at  risk  economic  sectors  that  are  highly  dependent  on  ecosystem 
services. Nature-based solutions are key to building climate resilience and to shielding 
the  economy  from  the  impacts  of  extreme  weather  events.  Intensive  agriculture,  in 
particular  livestock  farming,  releases  large  volumes  of  air,  soil  and  water  pollutants. 
Electricity production, the metal sector and chemicals production also cause pollution. 
While the Flemish government adopted a revised seventh nitrates action  programme, 
further action is needed to reduce nutrients and chemicals in surface waters and to help 
make farming more sustainable. 

(37)  The  job  vacancy  rate  in  Belgium  is  currently  one  of  the  highest  in  the  EU  (4.1% 
against the EU average of 2.3% in 2024) and employers are finding it difficult to hire 
employees with the right skills. Labour shortages and the lack of skilled staff hinders 
business  and  investment  activity,  including  for  the  green  transition.  Regional 
disparities in the share of the population in work, however, are significant and there is 
scope  to  improve  interregional  labour  mobility.  An  ongoing  concern  is  to  integrate 
disadvantaged groups, including people with a lower level of education, older workers, 
people with a migrant background and persons with disabilities. This suggests scope to 
increase the effectiveness of labour activation policies, particularly by improving the 
efficiency  of  public  employment  services  and  by  better  targeting  measures  to  help 
integrate  disadvantaged  groups  into  the  labour  market.  Skills  mismatches  are  also 
explained by the low rate of adults upskilling and reskilling. 

(38)  Despite  high  levels  of  public  spending  on  education,  learning  outcomes  have 
deteriorated and the share of top-performers has fallen sharply26. Socio-economic and 
migrant  backgrounds  are  still  important  predictors  of  student  performance.  While  all 
Communities  are  pursuing  large-scale  reforms  to  address  these  challenges,  further 
revising grade  retention  policies,  giving students  more flexibility  to  transfer between 
general  and  vocational  tracks  and  strengthening  personalised  learning  could  help 
address inequalities and declining  student performance. Improving the basic skills of 
all  students  is  crucial  to  improve  their  prospects  on  the  labour  market,  including 
disadvantaged groups. Labour shortages could be tackled by strengthening the labour 
market relevance of vocational education and training (VET) in technical professions 
and  by  increasing  the  number  of  ICT  (information  and  communications  technology) 
and STEM (science, technology, engineering and mathematics) students and graduates 
in  VET  and  tertiary  education.  Teacher  shortages  also  remain  critical  across  the 
country  and  disproportionately  affect  schools  with  higher  shares  of  disadvantaged 
students27. Greater action is merited to boost the teaching profession, in particular by 
ensuring job stability and providing attractive and differentiated career paths. 

(39) 

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  economic  and  monetary 
union,  in  2025, the Council recommended that euro area Member States take action, 
including  through  their  recovery  and  resilience  plans,  to  implement  the  2025 
the  euro  area.  For  Belgium, 
the  economic  policy  of 
Recommendation  on 
recommendations  (2),  (3),  (4)  and  (5)  help 
the  first  euro  area 
implement 
recommendation  on  competitiveness,  while  recommendations  (4)  and  (5)  help 
implement  the  second  euro  area  recommendation on resilience, and  recommendation 

26 
27 

2022 OECD Programme for International Student Assessment. 
Gambi, L., & De Witte, K. (2023), The uphill battle: The amplifying effects of negative trends in test 
scores,  COVID-19  school  closures  and  teacher  shortages.  FEB  Research  Report  Department  of 
Economics. 

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(1)  helps  implement  the  third  euro  area  recommendation  on  macro-economic  and 
financial stability set out in the 2025 Recommendation. 

HEREBY RECOMMENDS that Belgium take action in 2025 and 2026 to: 

1. 

2. 

3. 

4. 

5. 

Reinforce overall defence spending and readiness in line with the European Council 
conclusions  of  6  March  2025.  Adhere  to  the  maximum  growth  rates  of  net 
expenditure recommended by the Council on [date], with a view to bringing an end 
to the situation of an excessive deficit while making use of the allowance under the 
national escape clause for higher defence expenditure. Implement the set of reforms 
and  investments  underpinning  the  extended  adjustment  period  as  recommended  by 
the Council on [date] 2025. Make the long-term care system more cost-effective. 

In  view  of  the  applicable  deadlines  for  the  timely  completion  of  reforms  and 
investments under Regulation (EU) 2021/241, ensure the effective implementation of 
the recovery and resilience plan, including the REPowerEU chapter.  Accelerate the 
implementation of cohesion policy programmes (ERDF, JTF, ESF+), building, where 
appropriate, on the opportunities offered by the mid-term review. Make optimal use 
of  EU  instruments,  including  the  scope  provided  by  Invest  EU  and  the  Strategic 
Technologies for Europe Platform, to improve competitiveness.  

Simplify  regulation,  improve  regulatory  tools,  reduce  administrative  burden,  and 
remove  barriers  to  trade  and  competition,  in  particular  in  the  services  sector  and 
regulated professions, to improve the business environment and business dynamics. 
Increase innovation diffusion by targeting R&D public support to companies with the 
highest growth potential and by fostering the job mobility of workers. 

Reduce  overall  reliance  on  fossil  fuels,  including  by  stepping  up  energy  efficiency 
improvements and reducing fossil fuel use in buildings, and by further incentivising 
industry  to  decarbonise.  Provide  incentives  and  remove  barriers  to  increase  the  use 
and  supply  of  public  transport,  low-emission  transport  and  active  mobility. 
Accelerate  the  roll-out  of  renewable  energies  and  upgrade  grid  infrastructure  by 
further  streamlining  permitting  procedures,  by  adopting  legal  frameworks  to  boost 
investment in renewable energy installations and by facilitating energy sharing. Take 
specific  steps  to  phase  out  fossil  fuel  subsidies,  in  particular  in  the  transport  and 
heating  sector,  including  by  shifting  excise  duties  from  electricity  to  fossil  fuels. 
Take  further  action  on  sustainable  agriculture  by  improving  water  quality  and  by 
reducing nutrient losses. 

Address  labour  shortages  and  skills  mismatches,  including  for  the  green  transition. 
Strengthen the effectiveness and targeting of active labour market policies to further 
integrate  disadvantaged  groups  into  the  labour  market,  in  particular  people  with  a 
low level of education, older workers, people with a migrant background and persons 
with  disabilities.  Improve the performance and equity of the education and training 
systems and enhance their labour market relevance, in particular in ICT and STEM 
fields.  Continue  reforms  to  strengthen  the  teaching  profession  by  developing  more 
flexible and attractive career paths and training for teachers. 

Done at Brussels, 

EN 

For the Council 
The President 

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