2013 budget finally wrapped up

The Belgian government has finally reached a deal on its 2013 austerity budget, prime minister Elio Di Rupo announced via his Twitter feed in the early hours of this morning, after just over a month of arduous negotiations. “We have a deal on the 2013 budget and on supplementary measures for employment and competitiveness,” he wrote. Belgium needs to save €3.7 billion in 2013 if it is to reach its goal of cutting its deficit to 2.15 percent of its output during the year. Export-orientated Belgium has felt the pain of Europe’s economic crisis, and early figures from the central bank showed in October that its economy had stagnated in the third quarter. Its business confidence index has also fallen to its lowest level in three years. However, it has fared better than the Eurozone overall, where output fell by 0.1 percent in the third quarter, pushing the currency block into its second recession since 2009. France was stripped of its triple-A credit rating by Moody’s yesterday as the ratings agency was concerned about its uncertain fiscal outlook. Investors have deemed Belgium a haven for their money, buying three-month treasury bills at a negative yield. But since the start of the budget talks, the cost of insuring Belgian debt has risen, with five-year credit default swaps up by about 12 percent. Measures agreed overnight include a wage freeze for 2013 and 2014 (indexation remains, however, and minimum wages are exempt from the freeze) and state spending cuts to the tune of €674 million. VAT, after much debate, stays at 21 percent. Earlier measures comprised the issuing of new government bonds as well as increasing tax on tobacco products, with a pack of 20 cigarettes increasing in price by €0.20. The duty increase also applies to alcohol.

(with Reuters)