Federal government.

## Public debt of the federal government of Belgium

The public debt of the federal
government is special in two ways. One of which is the fact that it is
remarkably high, the biggest of all participating countries in this project.
The fourth biggest in the EU and somewhere between the 10th and 15th
worldwide. The second particularity is the composition of our national debt:
90% consists of tradable debt and most of that debt is a long term loan
(Agentschap van Schuld, 2016)

We will now
compare each country with this norm. The figures are from 2014. Concerning
budget surplus or deficit Poland is the worst country, with a deficit of -3.3. after
Poland comes Belgium with a deficit of -3.1, Followed by Austria, -2.7,
thereafter we have Sweden with -1.7, and the best country is Germany with a
surplus of 0.3% of the GDP. Concerning the public debt Belgium is the worst
student with an average public debt of 106.7 percent of the GDP, thereafter
comes Austria with 84.2 percent, then Germany 74.9 percent, then Poland with
50.4 % and the best country here is Sweden with 44.9%. We also compared the
United States with this norm. They had a deficit of 2.8% and a public debt of
103 %. Conclusion: only Sweden passes (Eurostat, 2016. Tradingeconomics, 2016.Verdrag
betreffende de Europese Unie) .

The reason for the high public debt
can be found in the political past of Belgium. Belgium consists of two main
parts: The Flemish region and the Walloon region.  Whenever a big public investment happened in
one region, politicians of the other part wanted a similar investment in their
region. This has led to a series of big works that were never finished or when finished
were hardly used. The political need for investments in both parts of the
country is called the ‘wafelijzerpolitiek’, freely translated as waffle iron
politics. Next to this, Belgium has reached such a big debt due to subsidies
for disappearing industries. Our country has spent way too much money on dying
industries such as steel production, coal mining, glass production and so on.
Most of these industries have now been offshored (Belgische schuld is een
uitschieter, 2016)

Although our national debt is
currently very high, it has been much higher in the past. From 1998 till 2007
the Belgian debt was constantly decreasing. Between 2008 and 2014 it was rising
again due to the financial crisis. Luckily the latest trends show a decrease
(Agentschap van Schuld, 2016).

As we have said most of our national
debt consists of tradable debt. To be more specific: 80% (2015) consists of
linear bonds. Linear bonds or OLOs are pieces of evidence that a person, in
reality a financial institution has lend out money to the state. OLOs can only
be bought by primary and recognized dealers. These are financial institutions
that possess the exclusive right to buy bonds. Each institution has to own at
least 2% of the OLOs to be considered a primary dealer. The primary and recognized
dealers are also obliged to buy 2% of the OLOs at every sales moment, because
bonds are only sold on specific times. Only two Belgian banks are primary
dealers and considering the fact that OLOs make up roughly between 80 to 90
percent of our national debt, this means that most of the Belgian debt is in
hands of foreign banks (agentschap van Schuld, 2016).

An important part of our tradable
debt is bought by the European Central Bank. They started to buy European bonds
in January 2015 and will do so until march 2017. The organization buys 60
billion euro of national bonds every month, in all the countries of the EU, in
order to ensure a stable inflation rate of around two percent and to lower the
interest on bonds. This measure is controversial. Especially Germany does not
like this measure, because they emphasize on budgetary discipline for each
country. It was also Germany who put pressure on the implementation of the
Maastricht norm. The German politicians are opined that each country should
have a good budgetary discipline and the current policy of the European central
bank is the complete opposite of that. Next to all this is the fact that some
economists doubt the positive effect of the policy of the ECB (Europa nu, 2016).

The
expenses of the federal government in 2016 will be 52 billion. The so called
authority cell represents the biggest expense post, consisting of among others:
the army, justice, foreign affairs, domestic affairs etc. In the last six years
Belgium spent less and less on the army, foreign affairs and development. In
the same time the expenses on domestic affairs almost doubled. The second
expense post is the social cell, consisting of pensions, public health, social
security and so on. An interesting fact is that the expenditure on pensions
rises year after year. This comes due to the aging of the Belgian population.
As we can see the amount of people older than 65 has risen with 300 000 in
the last decade. In 2010 Belgium paid 8 billion on pensions, this will be 10.7 billion
this year. The third expense post is the economic cell which represents the
expenses on economic stimulation. This remained quite stable over the last few
years (Federale overheid, 2016. FOD economie, 2016)

We will now handle the revenues of
the federal government. The Federal government will receive a total of 112
billion euro in 2016. It gives 2.8 billion to the European Union. 41 billion
euro goes to the communities and regions. 10 billion to social security. This
means that the federal government has 57 billion of means (Federale overheid,
2016. FOD economie, 2016)

To
recapitulate: the federal government has a revenue of 57 billion and spends 64
billion. This means that there is a gap of 7 billion euro. The deficit of
Belgium will be 2.6 % of the gross domestic product. This is conform the
Maastricht norm which obligates a European nation to have a deficit of less
than 3% (Federale overheid, 2016. FOD economie,2016).