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Federal budget: 1.7 billion additional deficit - Economic Policy

Federal budget: 1.7 billion additional deficit – Economic Policy

Belgium’s budget deficit will reach 6.1% of GDP in 2022, and not 5.8% as notified to the European Commission barely a month ago. Blame it on the reduced VAT on energy which had not been included.

The 2023 federal budget deficit will be larger than expected.

It was the N-VA that first revealed that there was a noticeable difference between the figures transmitted to the European Commission and the figures as they appear in the budget which has now been submitted to the House. In the draft budget sent to the Commission, the overall deficit of all Belgian governments amounts to 5.8% of gross domestic product (GDP), or 33.5 billion euros. Barely a month after the long and sluggish budget negotiations, Vivaldi and the Secretary of State for the Budget Eva de Bleeker (Open VLD) have reviewed their copy in the documents transmitted to the Chamber since it now stands at 6.1%. This represents an additional 0.3% of GDP, or 1.7 billion euros, but also half of the De Croo government’s 2023-2024 budgetary efforts, which immediately go up in smoke. It is also more than double what the European Commission allows.

How is it possible ?

“According to the De Bleeker cabinet, this adjustment is due to the decision taken by the Council of Ministers on October 28 to extend the reduction in VAT on energy and to introduce in return a reform of excise duties” specifies Echo. Neither the notifications accompanying the budget agreement nor the table distributed after the budget conclave contained an estimate of the budgetary cost of this measure. It is now done and the cost was finally estimated at 1.3 billion euros for 2023 and 1.7 billion for 2024.

As a precaution, any budgetary revenue would however not yet be taken into account since the exact moment of the entry into force of this reform is not yet known, it is however specified on the side of the De Bleeker cabinet. The hope remains that the final cost will always be lower than this worst-case scenario. According to De Standaard, two other minor setbacks – a lower dividend from the National Bank (268 million euros) and the payment of the fuel bonus (124 million euros) – would explain the rest of this new budget. minimum.

Another consequence of this revision, the debt ratio is also higher since it is now 109.4% of GDP instead of 108% further specifies L’Echo.

In addition, the budget tabled in the Chamber provides for a structural deficit of 3.4% of GDP next year and 3.5% instead of the 2.9% in 2023 and 3.2% in 2024 present in the project submitted. by the responsible State Secretary Eva De Bleeker (Open VLD) at the European Commission. This difference would be due to a different interpretation between the European Commission and the federal government on what constitutes exceptional expenditure.

Belgium will have the largest budget deficit in the eurozone over the next two years

This sad first place would be due to support measures to deal with rising energy costs and automatic wage indexation. Belgium’s debt will increase between 2023 and 2024. As things stand, Belgium would be the only country whose debt is greater than 100% of gross domestic product (GDP) to face an increase in its debt according to the European Commission. The budget deficit would be due to two factors. First of all, the government has taken strong support measures to help people cope with rising energy costs. The second reason is specific to Belgium: the automatic indexation of wages. According to the European Commissioner for the Economy, Paolo Gentiloni, however, now is not the time to change the system “because at the moment the social aspect is more important than in normal times, in the compromise between social and competitiveness.” Gentiloni believes that Belgium is not in an exceptional situation, however, the commissioner recalled that the European Union encourages member states to reduce extraordinary aid expenditure to compensate for rising energy prices.

The 2023 federal budget deficit will be larger than expected. It was the N-VA that first revealed that there was a noticeable difference between the figures transmitted to the European Commission and the figures as they appear in the budget which has now been submitted to the House. In the draft budget sent to the Commission, the overall deficit of all Belgian governments amounts to 5.8% of gross domestic product (GDP), or 33.5 billion euros. Barely a month after the long and sluggish budget negotiations, Vivaldi and the Secretary of State for the Budget Eva de Bleeker (Open VLD) have reviewed their copy in the documents transmitted to the Chamber since it now stands at 6.1%. This represents an additional 0.3% of GDP, or 1.7 billion euros, but also half of the De Croo government’s 2023-2024 budgetary efforts, which immediately go up in smoke. It is also more than double what the European Commission allows.”According to cabinet De Bleeker, this adjustment is due to the decision taken by the Council of Ministers on October 28 to extend the reduction in VAT on energy and to introduce in return an excise reform” specifies the Echo. Neither the notifications accompanying the budget agreement nor the table distributed after the budget conclave contained an estimate of the budgetary cost of this measure. This has now been done and the cost was finally estimated at 1.3 billion euros for 2023 and 1.7 billion for 2024. exact moment of the entry into force of this reform is not yet known, however, according to the De Bleeker cabinet. The hope remains that the final cost will always be lower than this worst-case scenario. According to De Standaard, two other minor setbacks – a lower dividend from the National Bank (268 million euros) and the payment of the fuel bonus (124 million euros) – would explain the rest of this new budget. minima. Another consequence of this revision, the debt ratio is also higher since it is now 109.4% of GDP instead of 108% further specifies L’Echo. In addition, the budget tabled in the Chamber provides for a structural deficit of 3.4% of GDP next year and 3.5% instead of the 2.9% in 2023 and 3.2% in 2024 present in the project submitted. by the responsible State Secretary Eva De Bleeker (Open VLD) at the European Commission. This difference would be due to a different interpretation between the European Commission and the federal government on what constitutes exceptional expenditure. This sad first place would be due to support measures to deal with rising energy costs and automatic wage indexation. Belgium’s debt will increase between 2023 and 2024. As things stand, Belgium would be the only country whose debt is greater than 100% of gross domestic product (GDP) to face an increase in its debt according to the European Commission. The budget deficit would be due to two factors. First of all, the government has taken strong support measures to help people cope with rising energy costs. The second reason is specific to Belgium: the automatic indexation of wages. According to the European Commissioner for the Economy, Paolo Gentiloni, however, now is not the time to change the system “because at the moment the social aspect is more important than in normal times, in the compromise between social and competitiveness.” Gentiloni believes that Belgium is not in an exceptional situation, however, the commissioner recalled that the European Union encourages member states to reduce extraordinary aid expenditure to compensate for rising energy prices.

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