Council Opinion

of 22 January 2002

on the updated stability programme of Belgium, 2002-2005

(2002/C 33/06)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies(1), and in particular Article 5(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 22 January 2002 the Council examined the 2001 update of the stability programme of Belgium, which covers the period 2002-2005.

In 2000, real GDP growth was particularly strong, reaching 4 %, driven by domestic demand and buoyant exports; the general government accounts reached a surplus of 0,1 % of GDP ahead of schedule, while the government debt was reduced by 5,7 % percentage points to 109,3 % of GDP.

In 2001, the economy suffered from the general economic slowdown and real GDP growth decelerated to 1,1 %. The initial general government budgetary target a surplus of 0,4 % of GDP (including the receipts from the UMTS licences) could not be met in 2001, but a surplus of 0,2 % of GDP was achieved; the government debt ratio is expected to decline to 106,9 % of GDP.

The 2001 updated stability programme is based on a macroeconomic scenario assuming a sustained economic recovery from the second quarter of 2002; real GDP growth is not expected to exceed 1,3 % in 2002. Real GDP growth is projected to accelerate in 2003 returning to potential in the final years of he programme. Due to the 2001-2002 economic slowdown the updated programme targets a general government balance in 2002 instead of a surplus of 0,3 % of GDP which was projected in the previous update; then, from 2003, the budgetary adjustment path is expected to be resumed, a government suplus of 0,5 % of GDP being forecast for 2003, increasing to 0,7 % of GDP in 2005. The government debt is projected to decline to 88 % of GDP in 2005 as expected in the previous update.

The Council considers that the temporary departure from the budgetary adjustment path projected in the 2000 update is not significant and can be justified by a cumulated loss in real GDP growth reaching 2,6 percentage points over the years 2001 and 2002. The Council notes that such departure took place in the context of a government surplus in 2000. The Council considers, however, that a balanced fiscal position should be achieved in 2002. The Council notes, moreover, that returning to the course outlined in the 2001 update of the stability programme from 2003 depends on strong economic recovery in the second half of 2002. The Council urges the Belgian Government to ensure that the previously projected budgetary adjustment path is resumed in 2003. Given the still very high level of the government debt and in view of the challenges in the long term induced by the ageing population, the Council recommends that all additional revenues which might stem from better than expected real GDP growth are allocated to debt reduction, a recommendation already made in its previous opinion(2).

The Council notes with satisfaction that the projected general government accounts remain close to balance or in surplus throughout the period of the programme and are therefore in conformity with the requirements of the stability and growth pact.

The Council notes that achieving government primary surpluses above 6 % of GDP per year has been particularly appropriate in the case of Belgium, taking into account that the government debt is still at a very high level; therefore, the Council welcomes the commitment to maintain a high level of primary surpluses of around 6 % throughout the period to 2005. The Council considers that, in order to achieve this objective, strict budgetary surveillance of all parts of government should be enforced, particularly in the social security sector and in Entity II, and that clear binding norms for expenditure control are instrumental for the budgetary adjustment. The Council notes that the limit of 1,5 % for the increase in real terms of primary expenditures in Entity I (federal government and social security) has been referred to in the updated programme. It therefore recommends that this limit continues to be firmly adhered to in the coming years.

The Council notes that the programme does not provide more detailed projections of revenues and expenditures, in particular government investment expenditures, as it was recommended in its Opinion of 12 March 2001(3); in addition, separate accounts for federal government and social security were not provided as required under the code of conduct for assessing general government budgetary developments.

The Council welcomes the structural reforms envisaged in the 2001 update, particularly the tax reforms aimed at reducing the tax burden and increasing employment as well as the policies aimed at ensuring the long-term sustainability of public finances.

(1) OJ L 209, 2.8.1997, p. 1.

(2) OJ C 109, 10.4.2001, p. 2.

(3) OJ C 109, 10.4.2001, p. 2.