Federal government agrees on budget to fill €3 billion hole

The federal government announced on Saturday that it had reached agreement on a budget for the rest of 2016 and for 2017, filling a €3 billion hole in the country’s finances with a mix of cuts in spending and tax changes. The agreement allows the government to meet today’s EU deadline.

The agreement contains just over €3 billion in savings and tax increases, including cuts to social security and health spending, an increase on the tax on income from interest and dividends, an extension of the tax on shares and limits to tax deductions on company cars.

Members of parliament gathered on Sunday to hear prime minister Charles Michel’s delayed State of the Union speech, which had been postponed while budget talks continued. Michel (pictured centre) stressed that the measures adopted would improve purchasing power and reduce costs for business to improve competitiveness.

The tax burden in Belgium in general had gone down during his administration, he said, from 37.1% to 36.8%, while labour costs for businesses had decreased from 26.3% to 25.5%. “There will be no new taxes on labour or consumption, no increase in VAT, no increase in excise duties and no changes to indexation or unemployment benefits,” he said. “We want a better future for everyone. The basis for that has been laid down.”

He also promised a study in the new year into Arco, the investment agency of Christian union ACW, which was a major shareholder in Dexia when the bank collapsed in 2011. Ordinary shareholders lost everything, but Arco members had their investment guaranteed by the state in the amount of €1.5 billion – an arrangement ruled illegal by the European Commission.

“The government accords confirm that a workable solution will be reached with an eye to partial damages for ordinary savers from recognised financial co-operatives,” Michel told the chamber. Economy and employment minister Kris Peeters, whose CD&V party is closely linked to Arco, said: “This is clear language from the prime minister. There will be a solution for the Arco saver in 2017.”

“Our reforms are producing their first fruit,” Michel added. “We will continue further down this road, to improve on these positive results.” He denied accusations from the opposition that people would have to work more hours. “Anyone who claims that everyone will all of a sudden have to work 45 hours a week is simply lying,” he said.

Meanwhile, socialist trade unions ABVV and CGSP warned the government they are not satisfied with the agreement and will continue to protest against government policies. The budget is “a case of cutting and pruning at the expense of ordinary people,” according to a statement put out by ABVV. “Anyone who has been unemployed for a long time or who is on a bridging pension will get less pension. Anyone who is sick or unemployed will have to wait longer for benefits. More than half of the budget savings will come from social security, even though ministers said that would be irresponsible.”

According to Chris Reniers, secretary-general of the socialist union for government workers CGSP, one of the measures means that some groups, including the military and rail personnel, will have to work longer before retirement. “There is no global plan,” she said. “This is simply guesswork – the politics of breaking down the state. The only ideology in sight is that of the employers.”

Photo: Nicolas Maeterlinck/BELGA