Caretaker Government strikes deal on the 2011 budget

Last night the Inner Cabinet decided to rein in Belgium's budget deficit to 3.6% of national output this year. The government still has to finalise how this goal will be achieved.

Last night the Inner Cabinet decided to rein in Belgium's budget deficit to 3.6% of national output this year. The government still has to finalise how this goal will be achieved.

Ministers of the outgoing administration met until late into the night. They reached agreement on the budgetary objective around 2 AM.

The Federal Government will be responsible for cutting the budget deficit by 3.1%. Belgium's devolved authorities will do the rest.

In all some 2.3 billion euros in savings need to be accomplished. The government can count on higher than expected dividends from a number of companies in which the Belgian state has a stake. These companies include a number of banks rescued during the banking crisis.

The treasury is also expected to receive more cash due to the lifting of banking secrecy and resulting amicable settlements.

Government ministries face 0.5 billion euros in cuts. Expenditure has also fallen because the government has to operate using an interim monthly-based budget.

Belgium's financial situation means that there is no scope for any new initiatives. Cuts will be made in the social security system too, but the government believes it can do this without causing any pain.

A number of measures still has to be finalised in working groups.

Keeping consumer energy prices low?

Some of the treasury's extra revenue comes from the 250 million euros that the electricity generators are paying in order to be allowed to keep the country's oldest nuclear reactors at work for longer than is currently allowed under Belgian law.

There are also plans to increase this amount through a new uranium tax. The Belgian Government is also eager to rein in spiralling energy prices. It hopes it can limit energy price rises to the hikes experienced by consumers in neighbouring countries.

There are also plans to restrict duty increases.

With a budget deficit of 3.6% Belgium will perform 0.5% better than its European target. The figure is also 0.1% better than the one requested by the High Council for Finances. The Council says that next year the budget deficit should be cut to 2.8% of national output. By 2015 Belgium's budget should be in surplus.