As expected, the European Commission has initiated proceedings against Belgium and several other EU member states for non-compliance with the Commission’s budget rules. The Belgian budget deficit is currently 4.4%, way above the 3% permitted by the EU.
In addition to Belgium, France, Italy, Hungary, Malta, Slovakia and Poland are also having their wrists slapped. The European Commission is demanding that Belgium and the other countries listed above take measures to bring down their respective budget deficits.
This is the first step in a procedure that could lead to Belgium having to pay a fine to the EU in the medium term. On Friday the Commission will present its report on the state of Belgium’s finances to the caretaker federal government. The report will include recommendations on how to proceed to reduce the deficit.
What happens now?
This not only concerns the budget deficit but also Belgium’s public debt level. Belgium has until 20 September to respond and to present a plan on how to address the issue. There are two options: A four-year plan with tough and drastic savings or a seven-year plan if this is accompanied by sufficient investments and reforms.
Belgium still without a new federal government
The timing could not be worse, as Belgium is still without a new federal government and the incumbent caretaker government is only able to take care of day-to-day business and not allowed to initiate any reforms that might be required to bring the deficit down. However, with the clock ticking it could put pressure on politicians to form a new federal coalition quickly so that the budget can be brought under control and tough measures from the European Union can be averted.