Planning Office report casts doubts on effects of state reform

According to a report finished by the Planning Office last October, a sixth state reform could have grave financial consequences for the federal state in the long run. The daily De Tijd writes that Yves Leterme, PM of the caretaker government, demanded that the report was not made public in order to avoid a negative impact on the financial markets.

The Planning Office (Planbureau) is the federal body concerned with making calculations in order to help the government determine its economic and other policies. It presented its so-called "working paper" to Mr Leterme on 23 October 2010.

The PM asked the Planning Office not to make the report public. "That decision can be defended, as releasing the report could stir the financial markets as these could have doubts about Belgium's financial situation", explains Stefaan Michielsen of De Tijd.

"The financial markets look at public debt in the first place: can a country pay off its debts? According to this report, Belgium could have a problem there in the long run."

New financing mechanisms bad news for the federal state?

It is also striking that the report puts question marks behind a sixth state reform and the plans for a new financing law, which have been on the table for the past months.

"In order to settle its public debt, the government has to cut public spending by 30 percent or it has to find 30 percent new income. However, when we look at the possible state reform, we see that this would have to be raised to 50 percent, which is impossible", says Michielsen.

That is why the report compiled by the Planning Office suggests that when powers are being devolved from the federal to the regional level, the federal state should keep 20 percent of the funding, instead of losing all the funds to the regions. Another suggestion is that Flanders, Brussels and Wallonia should help to pay off a part of the federal debt.

Johan Vande Lanotte puts things into perspective

Johan Vande Lanotte, the former Royal Mediator who worked out a possible state reform some months ago in his attempt to try to break the political stalemate, puts things into perspective.

Mr Vande Lanotte read the report and claims that the Planning Office suggests a worst case scenario. "The report starts from the assumption that the federal government is not taking any measures, for example that it leaves the growing cost for public health untouched."