2024-11-16 08:49:00
Update
November 16, 2024
09:49
The window that would still allow a budget to be voted on by December 31 is closing. The country will have to engage the autopilot of the provisional twelfths, with the risks that this entails.
Trainer Bart De Wever (N-VA) may continue his efforts to form a government as quickly as possible, and Vooruit affirms his desire to “put the budget in order and ensure our prosperity”, the window allowing a budget to still be voted on by the end of the year is closing. Even by calling for urgency and making parliamentarians work between holidays, such a scenario becomes more and more improbable. Just the opinion of the Court of Auditors takes three weeks.
Under Di Rupo I, whileThe majority agreement was concluded on November 28, 2011the government had not obtained the vote on its budget only at the beginning of February 2012. And in the meantime, Belgium continued to live under the regime of the provisional twelfths, as it did throughout 2011.
“The provisional twelfths prevent spending more than the previous year. But there is also no new revenue, necessary to reduce the deficit.”
November 29 deadline
The Secretary of State for the Budget, Alexia Bertrand (Open Vld), has already indicated that she is preparing to activate these provisional twelfths, which could be discussed in committee on December 3 and approved in plenary on December 19. Prime Minister Alexander De Croo (Open Vld) clarified in the House on Thursday that lack of prospect of a new government for November 29the procedure will be initiated.
The Federal Government would then go into budgetary autopilot: it would only be able to spend, each month, one twelfth of the budget for the year 2024, indexed. “This has the advantage ofprevent spending more than the previous yearexcept for exceptions authorized by Parliament, underlines Giuseppe Pagano, professor emeritus at UMons and specialist in public finances. But on the other hand, there is no no new recipes either. However, let’s be realistic, given the scale of the effort to be made, new revenue will be needed to reduce the deficit.”
In the meantime, Belgium would therefore continue to increase your debt. According to the latest forecasts from the European Commission, without corrective measures, Belgium’s public deficit, already at 4.6% of GDP in 2024, would increase further to 4.9% in 2025.
“There is a risk that nothing will happen until February-March, when the tour of the rating agencies will resume, and where we can expect a deterioration in Belgium’s rating.”
The ax of Europe and the markets
“In addition, Belgium is subject, like six other countries, to a excessive deficit procedureand should therefore receive recommendations from the European Commission next week on the actions to be taken”, adds Benoît Bayenet, professor of public finance at ULiège and ULB.
“As Belgium, after contact with the trainer, obtained from the Commission a deadline until the end of the year to submit its multiannual budgetary plan, I do not expect to receive this document now,” tempers the secretary of State to the Budget. But sooner or laterif Belgium does not move, the European Commission will return with a multi-annual trajectory over four years rather than seven, due to lack of structural reforms.” A deadline that the next full-time government could, however, try to renegotiate with the Commission.
In the meantime, the government in day-to-day affairs could not do much with these recommendations. “There is therefore a risk that nothing will happen until February-Marchwhere the tour of rating agencies will resume, and where we should expect a downgrade of Belgium’s rating“, warns Alexia Bertrand.
THE outlook is now negative at Moody’s as at Fitch, given the political and institutional context. However, a deterioration would likely force Belgium to pay more to borrow on the markets. “We must not cry wolf prematurely,” retorts Giuseppe Pagano. “For the moment, the markets are not panicking about the Belgian situation.” But of course, the longer decisions are taken, the more severe the efforts will be. The situation could also change quickly in the event of exogenous crisis.
“And if we do not submit a trajectory, and we do nothing to reduce the deficit, Belgium will also find itself a poor student in the European class, with a reporting plus strict which will be demanded”, also warns Benoît Bayenet.
The outstretched hand of the First
There remains one possible scenario, mentioned by Prime Minister Alexander De Croo last week: a collaboration between the government in current affairs and the trainer on the budget. “I think we should think about how to avoid our country losing a whole year and having a year of budget derailment. That’s not good for anyone,” the prime minister said.
One option would be to make a series of amendments to the provisional twelfths, to already initiate certain measures envisaged by Arizonain pensions or on the labor market for example. “Technically, it is not impossible, but politically, minds do not seem ripe to me,” said the Secretary of State for the Budget.
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What are the potential consequences for Belgium if budget negotiations are not resolved by the November 29 deadline?
Manded by the European Commission,” warns Benoît Bayenet.
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**In Summary: The Urgent Need for Budget Negotiations**
Belgium is facing a critical juncture as the deadline for budget negotiations looms on November 29. The Secretary of State for the Budget, Alexia Bertrand, has indicated that without a new government’s intervention, the country will have to operate under provisional twelfths. This restrictive measure allows for spending only a fraction of the previous year’s budget, but does not address the necessary new revenues to tackle the growing deficit.
Experts suggest that Belgium’s public deficit could worsen, climbing from 4.6% of GDP in 2024 to 4.9% in 2025 without corrective measures. There is a looming risk of downgrade from rating agencies if the situation remains unaddressed, with the markets currently adopting a cautious stance.
With Belgium engaging in excessive deficit procedures under European regulations, the expectation for structural reforms becomes increasingly critical. However, the interim government lacks the authority to implement substantial changes, leaving the country in a precarious position as it heads into 2024 without a clear financial trajectory.
The call for immediate and fruitful budget negotiations is more pressing than ever, as delays could exacerbate the current economic challenges and result in more stringent oversight from the European Commission.
