Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Belgium
Date: 2026-06-03
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, 3.6.2026  COM(2026) 201 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Belgium {SWD(2026) 200 final} - {SWD(2026) 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 
Articles 121(2) and 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  1466/97  (1),  and  in 
particular Article 3(3) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16 November 2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances (2), and in particular Article 6(1) 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: 

(1) 

1 

2 

 Regulation  (EU)  2024/1263  specifies  the  objectives  of  the  economic  governance 
framework,  which  aims  at  promoting  sound  and  sustainable  public  finances, 
sustainable  and  inclusive  growth  and  resilience  through  reforms  and  investments,  as 
well  as  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 
Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  The  European  Semester 
includes, in  particular, the formulation and the surveillance of the implementation  of 
country-specific recommendations. 

Regulation 

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 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj).  
Regulation (EU) 1176/2011 of the European Parliament and of the  Council of 16 November 2011 on 
(OJ  L  306,  23.11.2011 
the  prevention  and  correction  of  macroeconomic 
ELI: http://data.europa.eu/eli/reg/2011/1176/oj)  

(EC)  No 

2024/1263, 

imbalances 

30.4.2024, 

1466/97 

(OJ 

L, 

EN 

1 

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(2) 

(3) 

(4) 

(5) 

On  16 July 2025,  the  Commission  adopted  its  proposal  for  a  regulation  establishing 
the European Fund for economic, social and territorial cohesion, agriculture and rural, 
fisheries and maritime, prosperity and security for the period 2028-2034 and amending 
Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (3). The proposal 
aims to increase the effectiveness of Union funding by reducing the fragmentation of 
the  financial  architecture  and  to  support  Member  States  in  the  coordination  of  their 
economic policy in line with Article 175 TFEU.  

On  25 November 2025,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  adopted  the  2026  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  (4),  a  recommendation  for  a  Council 
recommendation on human capital in the European Union, and a proposal for the 2026 
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  area  (5)  on 
21 April 2026, and the Joint Employment Report, and the recommendation on human 
capital on 9 March 2026.  

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformational  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth.  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass, ensuring that EU 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  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  Recovery  and  Resilience  Facility  (RRF) 
implementation (6). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF,  in  particular  those  that  contribute  to  addressing 
challenges identified in the country-specific recommendations. 

3 

4 
5 
6 

Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  establishing  the  European 
Fund  for  economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime, 
prosperity  and  security  for  the  period  2028-2034  and  amending  Regulation  (EU)  2023/955  and 
Regulation (EU, Euratom) 2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the 
subject of negotiations with the co-legislators.  
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/oj.  
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/oj. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
(OJ  L  57,  18.2.2021,  p.  17,  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj).  

the  Recovery  and  Resilience  Facility 

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(6) 

(7) 

(8) 

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8 

9 

10 

11 

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Belgium.  It 
relevant  country-specific 
in  addressing 
assessed  Belgium’s  progress 
recommendations  and  took  stock  of  Belgium’s  implementation  of  the  RRP.  On  the 
basis  of  that  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 

On  20 June 2025,  the  Council,  upon  the  assessment  and  recommendation  of  the 
Commission, adopted a Recommendation endorsing the national medium-term fiscal-
structural  plan of Belgium  (7). The plan  covers the period  from  2025 until 2029 and 
presents  a  fiscal  adjustment  spread  over  seven  years.  The  Council  recommended  the 
following  maximum  growth  rates  of  net  expenditure:  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 the base year of 2024  of 3.6% in 
2025, 6.1% in 2026, 8.8% in 2027, 11.1% in 2028 and 13.4% in 2029. For the years 
2025-2029,  these  maximum  growth  rates  of  net  expenditure  coincide  with  the 
corrective  path,  as  recommended  by  the  Council  under  Article  126(7)  TFEU  on  20 
June 2025, with a view to bringing an end to the situation of an excessive deficit (8). 
Based  on  the  Commission’s  assessment  on  effective  action  of  3 June 2026  (9),  the 
excessive deficit procedure for Belgium is held in abeyance. 

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  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  (10)  and  this  proposal  was  welcomed  by  the 
European Council of 6 March 2025. Following the request of Belgium, on 8 July 2025 
the  Council,  upon  a 
the  Commission,  adopted  a 
Recommendation  allowing  Belgium  to  deviate  from  the  recommended  maximum 
growth  rates  of  net  expenditure  (11).  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.  

recommendation 

from 

Council Recommendation of 20 June 2025 endorsing the national medium-term fiscal-structural plan of 
Belgium (OJ C, C/2025/3698, 20.08.2025, ELI: http://data.europa.eu/eli/C/2025/3698/oj). 
Council  Recommendation  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive  deficit  in 
Belgium, adopted on 20 June 2025. All documents related to the excessive deficit procedure of Belgium 
can  be  found  at:  https://economy-finance.ec.europa.eu/economic-governance-framework/stability-and-
growth-pact/corrective-arm-excessive-deficit-procedure/excessive-deficit-procedures-
overview/Belgium_en. 
Communication from the Commission to the European Parliament, the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026)200 final.  
Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact’, Brussels, 19.3.2025, C(2025) 2000 final. 
Council Recommendation of 8 July 2025 allowing Belgium to deviate from the maximum growth rates 
of net expenditure as set by the Council under Regulation (EU) 2024/1263  (Activation of the national 
escape clause), (OJ C, C/2025/3960, 20.08.2025, ELI: http://data.europa.eu/eli/C/2025/3960/oj). 

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(9) 

On  30 April 2026,  Belgium  submitted  its  2026  Annual  Progress  Report  (12)  on 
adherence  to  the  recommended  maximum  growth  rates  of  net  expenditure,  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  implementing  its  recovery  and  resilience  plan  in 
accordance with Article 27 of Regulation (EU) 2021/241. The report on action taken 
under the excessive deficit procedure is integrated in the Annual Progress Report.  

(10)  Real  GDP  growth  in  2025  was  1.0%  and  HICP  inflation  stood  at  3.0%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  0.7%  in  2026  and 
0.9% in 2027, and HICP inflation to stand at 3.4% in 2026 and 2.6% in 2027.  
(11)  Based  on  data  provided  by  Eurostat  (13),  Belgium’s  general  government  deficit 
increased  from  4.4%  of  GDP  in  2024  to  5.2%  of  GDP  in  2025.  The  increase  in  the 
deficit in 2025 mainly reflects lower direct tax revenues, especially from corporations, 
and  higher  expenditure  on  defence.  Based  on  policy  measures  known  by  the  cut-off 
date of the forecast, the Commission Spring 2026 Forecast projects a  deficit of 5.2% 
of  GDP  in  2026  and  of  5.4%  of  GDP  in  2027.  Despite  consolidation  measures  to 
contain  current  spending  and  a  cumulative  net  expenditure  growth  below  the 
recommended maximum, the deficit in 2026 is only expected to stabilise due to weak 
economic growth and increasing interest payments. The increase of the deficit in 2027 
mainly reflects higher expenditure on defence and interest payments. 

(12)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (14),  which  includes  both 
nationally  and  EU  financed  expenditure,  was  contractionary,  by  0.3%  of  GDP,  in 
2025. It is projected to be contractionary in both 2026 and 2027, by 0.8% and 0.6% of 
GDP, respectively. 

(13)  Based on data provided by Eurostat (15), Belgium’s general government debt increased 
from 103.9% of GDP at the end of 2024 to 107.9% of GDP at the end of 2025. The 
increase in the debt ratio in 2025 mainly reflects the high primary deficit (+2.9 pps.), a 
favourable  snowball  effect  (-1.3  pp.)  and  a  debt-increasing  stock-flow  adjustment 
(+2.3  pps.).  Based  on  policy  measures  known  at  the  cut-off  date  of  the  forecast,  the 
Commission  Spring  2026  Forecast  projects  the  debt-to-GDP  ratio  to  increase  to 
110.5% by the end of 2026 and further to 112.8% by the end of 2027. The increase in 
the  debt  ratio  in  2026  and  2027  mainly  reflects  the  high  primary  deficits,  while  the 
favourable  snowball  effect  and  debt-increasing  stock-flow  adjustments  offset  each 
other. 

12 

13 
14 

15 

 The  2026  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   
Eurostat-Euro Indicators, 22 April 2026. 
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. 
Eurostat-Euro Indicators, 22 April 2026. 

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(14)  Based on Eurostat data (16), total general government defence expenditure in Belgium 
amounted  to  1.4%  of  GDP  in  2025,  corresponding  to  an  increase  of  0.5  percentage 
points  of  GDP  compared  to  the  reference  year  2021.  According  to  the  Commission 
Spring  2026  Forecast,  it  is  projected  at  1.6%  of  GDP  in  2026,  corresponding  to  an 
increase of 0.7 percentage points of GDP compared to 2021. 

(15)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 
inefficient.  Since  the  outbreak  of  the  war  in  the  Middle  East  in  February  2026, 
Belgium adopted fiscal  policy measures to mitigate the impact of high  energy prices 
on households (17). These include untargeted measures to compensate for higher fuel 
costs via a tax credit for firms that increase their mileage allowance for employees and 
a  targeted  social  transfer  to  compensate  for  higher  heating  costs  of  vulnerable 
households.  These  measures  are  expected  to  end  on  1  July  2026.  According  to  the 
Commission  Spring  2026  forecast,  the  fiscal  cost  of  these  measures  is  projected  to 
amount to less than 0.1% of GDP in 2026, also if these measures were to be extended 
until the end of the year. 

(16)  Based on the Commission’s calculations, net expenditure in Belgium grew by 3.7% in 
2025.  The  net  expenditure  growth  in  2025  is  above  the  recommended  maximum 
growth rate, corresponding to a deviation of 0.1% of GDP in annual terms. However, 
the deviation is within the flexibility of the national escape clause, taking into account 
the increase in defence spending. 

(17)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Belgium  is  projected  to 
grow by 2.0% in 2026, and 5.8% cumulatively over 2025 and 2026. The projected net 
expenditure growth in 2026 is below the recommended maximum growth rate. When 
considering  2025  and  2026  together,  the  projected  cumulative  growth  rate  of  net 
expenditure is also below the recommended maximum growth rate.  

(18)  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. Taking into account the information provided 
by  Belgium  in  its  Annual  Progress  Report,  the  Commission  finds  that  the 
implementation of the key steps of these reforms and investments that were due by 30 
April 2026 seems to be broadly on track. However, some reforms experience a delay 
in implementation. Namely, the adoption of the pension reform by the Parliament, that 
was due in Q4-2025, is now expected in 2026. The tax reforms, due in Q1-2026, have 
been partly implemented and the remaining parts are expected to be finalized by July 
2026. The two reforms to improve the budgetary coordination between different levels 
of  government,  due  in  Q4-2025,  have  been  largely  agreed  at  government  level  and 
now need to be legislated, which is expected to be completed by the end of 2026. The 
Commission considers that, overall, Belgium has complied with its commitments in a 
satisfactory manner (18). 

16 
17 
18 

Eurostat, government expenditure by classification of functions of government (COFOG). 
This reflects the situation at the cut-off date of the Commission’s Spring 2026 Forecast (4 May 2026). 
Communication from the Commission to the European Parliament, the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026)200 final. 

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(19)  Belgium faces high fiscal sustainability risks in the medium term and the long term. A 
comprehensive  fiscal  strategy  is  needed  to  bring  public  debt  on  a  downward  path, 
while  pursuing  reforms  to  strengthen  potential  growth.  Public  spending  in  Belgium 
stood at 54.2% of GDP in 2025, among the highest in the EU. Persistently high public 
expenditure  in  Belgium,  requiring  a  high  overall  tax  burden,  weighs  on  economic 
efficiency.  Policy  action  is  fragmented  across  the  several  government  levels 
(municipalities, provinces, regions and communities, federal level) in Belgium. Their 
coexistence involves a complex distribution of competences and a risk of duplication, 
leading to redundant administrative costs, without necessarily improving the quality of 
public services provided. A lack of effective inter-federal coordination complicates the 
delivery  of  certain  policies  and  reforms,  leads  to  inefficiencies  in  public  investment 
management and to overall lower public investment level than in other EU countries. 
As a result, sustainable public finances in  Belgium  call for decisive action on public 
spending,  in  terms  of  its  level,  composition  and  overall  efficiency.  While  the 
introduction  of  spending  reviews  at  federal  and  federated  entity  level  (regions  and 
communities) is a first step to enhance the quality of public spending, further action is 
needed  to  channel  public  resources  to  more  growth-friendly  policies.  Streamlining 
government  structures,  clarifying  competences  and 
inter-federal 
coordination  could  contribute  to  greater  economic  efficiency,  while  providing  fiscal 
space. 

reinforcing 

(20)  According to the Commission’s 2024 Ageing Report (19), pensions and long-term care 
expenditure are the main drivers of a projected increase in ageing-related spending of 
around  5  pps  of  GDP  by  2070,  substantially  higher  than  the  EU  average  of  1.4  pps. 
The  ongoing  pension  reform  is  expected  to  reduce  the  projected  increase  in  pension 
expenditure by 1.6 pps between 2024 and 2070. However, Belgium would remain one 
of  the  countries  with  the  highest  public  spending  on  long-term  care  in  the  EU, 
amounting  to  2.3%  of  GDP  in  2022  (EU  average  1.7%).  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,  contributing  to  increase  long-term  fiscal 
sustainability  risks.  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,  although  it  has  been  decreasing  over  the 
last decade. Regions are taking measures to make the use of the different care settings 
more cost-efficient, although most measures are limited in scope or at an early stage. 
This  suggests  room  to  further  improve  the  cost-efficiency  of  care,  including  by 
strengthening  measures  to  discourage  overuse  of  residential  care  and  improving 
community-based services.  

(21)  The systematic, meaningful and timely 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 Union’s funding 
instruments, as well as in the context of the European Semester.    

(22)  The implementation of cohesion policy programmes, which encompass the European 
Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF)  and  the 
European Social Fund Plus (ESF+) in Belgium, has been progressing well especially 
in terms of project selection. However, it is important to step up efforts to ensure the 

19 

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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swift  delivery  of  selected  projects,  notably  to  accelerate  spending  at  the  beneficiary 
level, 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 needs to accelerate the implementation of the JTF as resources are 
due  for  disbursement  by  the  end  of  2026.  It  is  essential  to  ensure  that  the  new 
investments identified by Belgium in its mid-term review of the cohesion policy funds, 
notably  those  linked  to  the  five  priorities  identified  in  the  Mid-Term  Review 
Regulation (20), are deployed rapidly and effectively. 

(23)  Belgium faces several challenges related to innovation, the business environment, the 
regulatory  and  administrative  burden  and  complexity,  regulatory  restrictions  in  the 
service  sector,  the  decarbonisation  of  industry  and  transport,  the  roll-out  of 
renewables,  fossil  fuel  subsidies,  water  quality  and  excessive  nitrogen  deposition, 
labour  shortages  and  skills  mismatches,  the  integration  of  disadvantaged  groups  into 
the labour market, the education system and the teaching profession. 

(24)  Despite simplification initiatives taken by all levels of government, a high regulatory 
burden  and  a  high  level  of  administrative  complexity  continue  to  impair  Belgium’s 
business environment. Moreover, a more systematic use of impact assessments and a 
better access to data would improve the quality of policy making. The administrative 
burden  on  firms  is  heavy,  particularly  regarding  employment  regulation,  social 
security  and  operational  costs.  Companies  that  need  to  manage  multiple  regional 
systems or need to obtain business permits  for the development of their activity  face 
significant constraints. Permits are handled by federal, regional, and local authorities, 
which makes the process complex, fragmented, and costly. This is particularly the case 
for  building  permits,  negatively  impacting  the  construction  sector  and  leading  to 
housing  shortages  and  delays  in  infrastructure  projects.  The  lack  of  resources  and 
inefficiency  of  the  justice  system  which  translates  in  chronic  backlog  and  slow 
procedures  also  continues  to  challenge  the  business  sector.  Moreover,  restrictions  in 
some  regulated  professions  remain  high,  which  could  hinder  cross-border  business 
activity or  create  entry barriers for firms. Strict  regulations  or other barriers to  entry 
also  apply  for  cross-border  provision  of  services,  like  the  retail  sector  and  in  the 
energy sector, which may limit competition. 

(25)  Belgium has one of the lowest levels of business dynamism in the EU (21). While the 
share  of  new  firms  in  Belgium  is  on  par  with  neighbouring  countries,  the  share  of 
high-growth  businesses  (scale-ups) is  well below the EU average (0.25% vs 0.79%). 
Barriers that prevent Belgian start-ups from scaling up include high labour costs and 
size-dependent tax relief (22). Among those, the first-hire subsidy was found not to be 
effective  to  boost  sustainable  job  creation  and  special  tax  features  for  small  and 
medium-sized enterprises (SMEs) (e.g. reduced corporate income tax rate) were found 
to  encourage  entrepreneurs  to  incorporate  and  convert  labour  income  into  capital 
income  (‘management  companies’).  Difficult  access  to  finance  during  the  scale-up 
phase  may  also  prevent  businesses  from  growing.  This  is  particularly  the  case  as 
markets  for  venture  and  growth  capital  are  not  broadly  developed.  Harmonising  tax 

20 

21 
22 

Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18  September  2025 
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. 
National Bank of Belgium, Competitiveness scoreboard indicators, 2024 report. 
Bijnens, G. (2025) Reigniting growth: trends and challenges for business dynamism in Belgium.  NBB 
Economic Review 

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rules for all investment types (including for immovable property investments, pension 
products, savings accounts, securities accounts) could incentivise equity investments. 

(26)  Although Belgium ranks as one of the EU’s innovation leaders and has a high level of 
R&D intensity (3.36% of GDP in 2024, among the highest in the EU), Belgian R&D 
activity is concentrated in a few industries and large companies, with several barriers 
hindering the diffusion of innovation throughout the economy. Moreover, in Wallonia 
the impact of R&D investment on employment and the economy remains limited due 
to  fragmented  business  support  and  insufficient  economic  diversification,  although 
some  ongoing  reforms  may  reverse  the  trend.  High  levels  of  R&D  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 
innovation across sectors and firms. Studies (23) show that there is 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. 

(27)  While  low-carbon  electricity  supply  (nuclear  and  renewables)  continues  to  increase, 
Belgium remains highly dependent on fossil fuel imports (67.1% of Belgium’s energy 
mix).  Energy  efficiency  improvements  were  insufficient  in  2024  to  continue  the 
downward trend of Belgium’s final energy consumption observed since 2019. This is 
mainly  due  to  the  increasing  energy  consumption  and  emissions  of  the  transport 
sector. More ambitious policy action is also needed to decarbonise the building stock, 
including  social  housing,  which  accounts  for  33%  of  national  energy  consumption. 
Renovation  measures  made  residential  energy  consumption  fall,  but  not  enough  to 
meet long-term renovation targets. 

(28)  High  electricity  costs  hinder  the  further  decarbonisation  of  the  economy  and  in 
particular the manufacturing sector. After taxes and levies (24), electricity costs almost 
four times more per unit than gas for industries, which is one of the highest ratios in 
the EU and  hinders  the  switch from  fossil fuels  to  electricity.  While the  government 
plans  to  lower  excise  duties  on  electricity,  effective  policy  action  is  needed  to 
incentivise  industries  to  shift  to  cleaner  energy.  Carbon  contracts  for  difference  and 
green  public  procurement  could  contribute  to  derisking  investment  and  further 
incentivize industries to decarbonise. Fostering circular economy practices could also 
help  reduce  industrial  energy  demand  and  dependency  on  imports  of  critical  raw 
materials.  Moreover,  investing  in  energy  infrastructure  and  low-carbon  technologies 
would  support  the  decarbonisation  of  carbon-intensive  and  hard-to-abate  industries, 
notably  in  Wallonia  and  in  Flanders,  including  around  the  port  of  Antwerp,  while 
preserving competitiveness. 

(29)  The  roll-out  of  renewables  in  Belgium,  although  reaching  a  record  of  34.7%  of 
electricity  generation  in  2025,  is  still  held  back  by  insufficient  grid  capacity,  which 

23 

24 

OECD (2021a) R&D Tax Incentives: Belgium, 2020. Schoonackers, R. (2020) Tax incentives for R&D: 
Are  they  effective?  NBB  Economic  Review  and  OECD  (2024),  OECD  Economic  Surveys:  Belgium 
2024. 
Taxes and levies cover value added taxes, excise duties, federal energy contribution, offshore surcharge, 
charges  linked  to  security  of  supply  and  capacity  mechanisms,  green  certificates,  CHP  levies,  public 
service obligation charges, renewable support levies, social tariff financing, energy efficiency oblitation 
costs. 

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the  main  challenge 

in  Belgium’s  energy 

became 
transition.  While  several 
infrastructure  projects  are  planned  to  reinforce  the  electricity  grid,  progress  on  key 
connections  is  slow,  particularly  due  to  stalled  decision-making  in  Wallonia  and 
permitting  issues.  Accelerating  the  upgrade  of  grid  infrastructure  and  speeding  up 
permit-granting procedures would promote the deployment of renewables. In addition, 
adjusting legal frameworks to boost investment in electricity storage and demand-side 
response, and  facilitating energy sharing by incentivizing smart meter deployment in 
Brussels and Wallonia, could increase the flexibility of energy consumption and entail 
energy efficiency gains. 

(30)  Belgium’s  rising  final  energy  consumption  is  mainly  due  to  the  increasing  energy 
consumption  and  emissions  of  the  transport  sector,  in  particular  of  international 
aviation, maritime and road freight sectors (25). Rail transport remains an insufficiently 
attractive option, both for passenger and freight transport, and the number of passenger 
cars has steadily increased leading to high congestion costs. The share of electric cars 
of  total  car  sales  has  recently  plateaued,  possibly  due  to  the  lack  of  charging 
infrastructure  in  Wallonia.  Stepping  up  energy  efficiency  improvements,  supporting 
electrification and the production and deployment of sustainable fuels for aviation and 
maritime  sectors,  could  accelerate  the  decarbonisation  of  the  transport  sector. 
Moreover, differentiated road charging for all types of vehicles, further investment in 
public transport – beyond investments included in Belgium’s Recovery and Resilience 
Plan  –  and  promoting  car  sharing  and  active  mobility  would  make  transport  more 
sustainable. 

(31)  The Belgian authorities (26) estimated federal direct fossil fuel subsidies to amount to 
2.4%  of  GDP  in  2022,  of  which  many  without  phase-out  plan  before  2030.  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  to 
industrial  competitiveness,  could  be  considered  a  phase-out  priority.  Fossil  fuel 
subsidies such as reduced excise duties on professional diesel, company fuel cards and 
reduced  VAT  on  gas  are  economically  inefficient  and  perpetuate  reliance  on  fossil 
fuels.  Reduced  excise  duties  on  heating  oil  and  gas  lower  their  cost  compared  to 
electricity,  which  hinders  the  switch  to  greener  heating  systems  and  holds  back  the 
energy renovation of buildings. Since Belgium risks failing to meet its renovation and 
energy efficiency targets for 2030, stepping up investment in energy renovations and 
complementing  investment  with  policy  reforms  to  shift  the  incentives  to  energy 
renovation and low-carbon heating solutions – while safeguarding equity – would help 
accelerate  the  energy  transition.  While  a  shift  from  excise  duties  from  electricity  to 
fossil  fuels  for  households  has  been  announced,  it  is  uncertain  if  this  shift  will  be 
sufficient to change the relative prices of electricity and fossil fuels quickly enough to 
meet the 2030 targets. 

(32)  Water quality and nature degradation are a challenge, as most water bodies in Belgium 
are affected by diffuse pollution sources.  Intensive agriculture, in particular livestock 
farming, releases large volumes of air, soil and water pollutants. While measures were 
taken electricity production, the metal sector and chemicals production also  continue 
to  cause  pollution.  Declining  levels  of  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 

25 
26 

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

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weather  events.  While  the  Flemish  government  adopted  a  revised  seventh  nitrates 
action  programme,  further  action  is  needed  to  reduce  excessive  nitrogen  depositions 
and to make farming more sustainable. 

(33)  Belgium has a low employment rate (72.8% against 76.1% in the EU on average) and 
employment  rates  vary  greatly  between  regions.  The  labour  market  participation  of 
disadvantaged  groups,  i.e.  people  with  a  migrant  background,  a  low-education  level, 
older people and people with disabilities is low. In 2025 Belgium has adopted major 
labour market reforms, including restricting the duration of unemployment benefits to 
two  years.  However,  their  impact  will  depend  on  the  effectiveness  of  accompanying 
labour  activation  policies.  Moreover,  there  is  scope  to  improve  the  effectiveness  of 
measures to help integrate disadvantaged groups into the labour market and to improve 
the  efficiency  of  public  employment  services.  This  should  also  help  tackle  the  high 
rate  of  persons  in  very  low  work  intensity  households  and  address  differences  in 
labour  market  outcomes  across  regions  and  groups.  At  the  same  time,  although 
steadily  declining  over  2025,  the  job  vacancy  rate  in  Belgium  remains  firmly  above 
the  EU  average  (3.8%  against  2.1%  in  2025).  Labour  and  skills  shortages  remain 
particularly  high  in  the  services  sector,  as  well  as  in  professional,  scientific  and 
technical  sectors,  and  sectors  like  healthcare,  construction  and  ICT,  all  of  which  are 
important  for  future  competitiveness,  including  the  green  and  digital  transition. 
Upskilling  and  reskilling  could  reduce  skills  mismatches,  but  adult  participation  in 
education  or  training  is  low  (34.9%  in  2022;  EU:  39.5%),  in  particular  in 
disadvantaged groups.  

(34) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 
action  to  urgently  address  human  capital-related  structural  challenges  in  the  areas  of 
skills  and  education,  which  hamper  competitiveness.  The  2026  country-specific 
recommendations  addressed  to  Belgium  can  contribute  to  the  implementation  of  the 
Council Recommendation on human capital in the Union.  

(35)  Children  and  young  people’s  educational  performance  in  basic  skills  (literacy, 
mathematics and science) in all three Communities (Flemish, French and German) is 
on a long-term decline, as evidenced by international assessments. While the Flemish 
and French Communities are implementing large-scale curricula reforms focusing on 
basic  skills,  educational  gaps  related  to  socio-economic  and  migration  status  persist 
and  are  exacerbated  by  early  streaming  into  different  educational  tracks  and  grade 
repetition. Increasing  work-based learning could  improve labour market  relevance of 
medium-level  vocational  education  and  training  (VET).  Increasing  enrolment  in 
science,  technology,  engineering  and  mathematics  (STEM)  and  information  and 
communications technology (ICT) fields at all levels, in particular of female students, 
could  contribute  to  meeting  labour  market  demand.  Measures  to  address  teacher 
shortages are being implemented, but teachers in Belgium continue to face barriers to 
engage  in  impactful  professional  learning  and  feel  undervalued  by  society.  Public 
spending on education is among the highest in the EU. This may be related to lower 
student-to-teacher  ratios  across  educational  networks  in  each  Community  and  a 
relatively lower statutory teaching time. Reducing the fragmentation of the education 
system may increase spending efficiency and address structural challenges. 

(36) 

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  2026  the  Council  recommended  that  the  euro-area  Member  States  take 
action, including through their RRPs, to implement the 2026 Recommendation on the 

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economic  policy  of  the  euro  area.  For  Belgium,  the  recommendations  (1)  helps 
implement the first and the second recommendation on the euro area, recommendation 
(2) helps implement the fourth recommendation on the euro area, recommendation (3) 
helps  implement  the  seventh  and  nineth  recommendations  on  the  euro  area, 
recommendation  (4)  helps  implement  the  seventh  recommendation  on  the  euro  area 
and  the  recommendation  (5)  help  implement  the  fifth  recommendation  on  the  euro 
area. 

HEREBY RECOMMENDS that Belgium take action in 2026 and 2027 to:  

1. 

2. 

3. 

4. 

Continue adhering to the maximum growth rates of net expenditure recommended by 
the  Council  on  20 June 2025,  with  a  view  to  bringing  an  end  to  the  situation  of  an 
excessive deficit, while making use of the flexibility under the national escape clause 
for  higher  defence  expenditure.  Reinforce  defence  spending  and  readiness  while 
ensuring  spending  efficiency  and  gradually  adapting  the  budget  to  sustain 
structurally higher defence spending. Ensure that any measures taken to mitigate the 
impact of the hike in energy prices are temporary, targeted at protecting vulnerable 
households or at addressing the needs of energy-intensive firms, preserve incentives 
for  energy  savings  while  ensuring  that  their  fiscal  cost  is  compatible  with  the 
commitments  under  the  EU  fiscal  framework.  Implement  the  set  of  reforms  and 
investments  underpinning  the  extended  adjustment  period  as  recommended  by  the 
Council  on  20 June 2025.  Improve  the  efficiency  of  public  spending,  streamline 
government  structures  and  reinforce  inter-federal  coordination.  Make  the  long-term 
care system more cost-effective. 

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Step  up  efforts  to  implement  cohesion  policy  programmes 
building, where appropriate, on the reallocation to strategic priorities in the mid-term 
review and the flexibilities provided in the cohesion policy framework available. 

Simplify  and  improve  regulation,  reduce  administrative  burden,  including  by 
streamlining permitting procedures and by removing regulatory barriers in services, 
to  improve  the  business  environment  and  business  dynamics,  while  addressing 
regional disparities. Increase innovation diffusion, by targeting R&D public support 
to  companies  with  the  highest  growth  potential  and  facilitate  access  to  finance  for 
scale-ups. 

Reduce overall reliance on fossil fuels, including by improving energy efficiency of 
buildings  and  by  further  incentivising  industry  to  decarbonise.  Take  measures  to 
increase  the  use  and  supply  of  sustainable  transport  and  tackle  road  congestion. 
Accelerate the upgrade of grid infrastructure and the roll-out of renewable energies, 
by further streamlining permitting procedures, while addressing regional disparities, 
and  promote demand-side flexibility  and storage.  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 excessive nitrogen deposition. 

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5. 

Address  labour  shortages  and  skills  mismatches.  Strengthen  the  effectiveness  and 
targeting  of  active  labour  market  policies  to  further  integrate  disadvantaged  groups 
into the labour market and to address regional disparities. 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, 

For the Council 
The President 

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