Mon, Jan 09, 2012 - Page 10 News List

Belgium says it will halt spending to appease EU


Belgium will freeze more than 1 billion euros (US$1.3 billion) in spending for several months after the European Commission raised concerns, the country’s budget minister said on Saturday.

The commission, the EU’s executive body, has rejected Belgium’s budget for this year as overly optimistic and demanded it shave off 1.2 billion to 2 billion euros to avoid breaching the 3 percent deficit threshold.

“The commission has given us the choice to either come up this weekend with savings of 1.2 billion euros, which we refused to do, or to freeze some of our spending over a period of several months, which is what we have opted for,” Belgian Budget Minister Olivier Chastel told RTL-TVI television.

In a letter sent on Thursday to Belgian Finance Minister Steven Vanackere, the commission said Belgium should “in the coming days” agree to pare down the budget by about 1.2 to 2 billion euros.

“This would allow us to conclude ... that Belgium has undertaken the required fiscal effort,” it said, demanding a response by this morning at the latest.

Under new rules agreed last month that give the commission added powers to enforce budgetary discipline, infringement of the 3 percent deficit ceiling can set off a quick train of action including fines and judicial penalties.

The commission last year singled out Belgium and four other EU nations — Hungary, Poland, Cyprus and Malta — as possibly failing to meet the target.

It has said it would issue a statement on Wednesday.

Chastel said the freeze would not influence budget decisions to be taken by the government next month.

RTL said the main target of the savings freeze would be 400 million euros destined for the railways. The defense department will also have to delay the purchase of helicopters because of a freeze on 177 million euros.

The Belgian budget, based on a 0.8 percent growth rate, forecasts a 2.8 percent deficit after sweeping cuts of 11.3 billion euros aimed at avoiding a no-policy-change deficit that could have run up to 4.6 percent of GDP.

However, commission experts believe Belgian Prime Minister Elio Di Rupo’s government was over-optimistic on expected savings, notably in healthcare, and on expected revenues from the fight against tax evasion.

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