Belgium risks non-compliance with the EU fiscal rules

The European Commission has pointed out a risk of deviation with regard to the fiscal targets when looking at the Belgian draft budget plan (DBP) 2019.

If you have followed European news over the last few weeks, you may  have heard about Italy and its fiscal issues. The Italian government has faced criticism with regards to its fiscal targets, as it aims to implement a set of measures that could induce some issues with regard to public finances. While the European Commission was presenting its autumn opinions on the national draft budget plans 2019, a big focus was on Italy.

But those opinions are definitely not only about Italy, and each Member State of the Euro area has received an evaluation from the Commission. Belgium was therefore no exception in this regard and although there is no major risk today, the Commission has shared a few concerns for next fiscal year.

Under the EU fiscal rules, which are part of the Stability and Growth Pact, Belgium should reduce its structural deficit of 0.6% of GDP per year (the structural deficit refers to the deficit without any impact of growth). For that purpose, the nominal growth rate of government expenditure should not exceed 1.6% of GDP this year.

The Commission however has found a “risk of significant deviation”, with an expenditure benchmark gap of 0.8% of GDP in 2018. This gap also should reach about 0.9% of GDP next year.

 

 

This is why the institution found a “risk of non-compliance” within the EU fiscal rules. It then invites the Belgian Federal government to implement some measures or reforms in order to comply with those rules. Although it seems there is no risk of sanctions today, the main point is about avoiding any sort of sanctions in the future.

Many parties across the EU often criticise the way EU fiscal rules have been designed. But the point is about trying to comply with the EU legal framework.

Four additional countries also face a risk of non-compliance with the EU fiscal rules in 2019: France, Portugal, Slovenia and Spain.