“Belgium risks a return to the 1980s”
Should we worry about Belgium’s budgetary situation? For the economist Geert Noëls, Belgian politicians know it very well, but do not say it publicly: the return of the European baton is hanging in our faces.
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Is Belgium heading straight into the wall?
The situation is worrying. It is necessary to take into account the significant commitments for the years to come, whether in terms of the fight against climate change or to finance the aging of the population, Defense… To this are added the interest charges which seem to go up over the long term. Therefore, if we do not change policy, Belgium risks going into the wall, yes. And to exceed the 10% deficit within ten years, which would mark a return to the 1980s.
Are some Regions more concerned than others? The Walloon Region?
Yes. The problem is less at the federal level than for certain Regions. We are witnessing, for example, a distance between the Belfius bank and the Walloon Region, because of its poor budgetary situation. Or, Belfius is a commercial bank, it must respect the rules imposed by the ECB.
Is the deficit more worrying because it will have repercussions on the debt?
Absolutely. The deficit precedes the debt. The politicians tried to explain that it was due to economic factors, such as the Covid or energy prices, but the BNB established that it was indeed a structural deficit which exceeded 5% next year.
Will the rate hike last?
We are witnessing an increase everywhere in Europe and in the world. Given the decisions taken by the central banks, in Europe and the United States, I do not see how we can go back, with zero or negative rates like two years ago. Moreover, even if inflation tends to decrease a little, the rates do not decrease. Hence the warning from the Court of Auditors which fears the snowball effect. Politicians should take notice. Of course, it’s not for now. But we can easily predict the future. Snowball effects are known and very difficult to master.
The Belgian government had to react to Covid and energy prices, as in most European countries. Was he too generous?
Belgium has been much more generous than others. The European Commission has been singled out for the excessively rapid growth of its expenditure and the lack of targeting of the aid granted, due to the fact that there was already a mechanism for indexing salaries. The Belgian government overcompensated the effect of the price increase. We must also not forget that we always pay for the waste of the Verhofstadt governments (Editor’s note: between 1999 and 2008), the effects of which are still being felt, for example because of the “sale and lease back” which cost us half a billion a year to rent the public buildings sold at the time. And this, while at the end of the 1990s, we had the healthiest public finances in Europe, thanks to Jean-Luc Dehaene.
For you, is there therefore a great political responsibility in all this?
Absolutely. Each ruling party wants to please its electorate, making decisions that will cost a long time. But when the bill arrives in a few years, as with the “sale and lease back”, those responsible for these decisions will no longer be in office. It’s not even short-term politics. It is irresponsibility. Today, after the pandemic and the energy crisis, it seems that politicians are waiting for the next crisis to excuse new spending. Unless an authority like the European Commission comes knocking on the door saying “Stop, you can’t go on like this anymore! “.
The risk is the European backlash and austerity? Is it inevitable?
Behind the scenes, politicians admit that they expect this backlash. But they do nothing. I see a certain fatalism there, but also a lack of knowledge of budgetary dynamics. When I hear that the Secretary of State for the Budget – note that it is no longer a minister – says that she will see the budget in a weekend, it makes me smile. In Belgium, there are only a few dozen people who really know the dynamics of the budget. It’s a job.
The Belgian debt is high, but this is also the case in many European countries where the situation is worse: France, Italy…
It’s true, Belgium is very close to France, whose situation is just as worrying. In Italy, it is true that the debt is high, but the cost of aging is lower there than here.
In the Netherlands, the debt is around 50% of GDP. How do they?
The Dutch have a much more developed culture of budgetary discipline. That said, we can observe signs of a belgicisation of political behavior because the coalition in power is very variegated. It also increased public spending in an electoral fashion in order to preserve the coalition. But hey, their debt and their deficit are far from reaching our levels…
Are you pessimistic for Belgium?
Yes. Especially since the elections are not far away, which will not improve electoral reflexes. Obviously, with high inflation, the debt ratio is stabilized. For the moment.
What could be decided, if it does not last?
Confiscation of savings through wealth taxes. This would hurt those who have been more careful than the government in not wasting their money. Another radical solution: the default or non-reimbursement of the debt by gradually increasing it in the hands of the Central Bank. But that amounts to hiding the dust under the rug. Or, dust always ends up springing.
The context
A debt that is close to 110% of GDP, a deficit that exceeds 5%. The European Commission, which points to excessive public spending. The Court of Auditors which warns of a risk of a snowball effect with rising interest rates. Is Belgium on the edge of the abyss? Several economists have been sounding the alarm since this summer. But from there to give reason to Bart De Wever who announced that Belgium risked becoming the new Greece…