If no cuts are made Belgium's budget deficit will top 4.6%. The European Commission(EC) is also introducing a new budgetary deadline for Belgium. Measures must be in place by mid-December it now says. The six government parties currently negotiating a new Federal Government are currently examining the 2012 budget.
Economic growth of 0.9% is lower than anticipated only a couple of months ago, but the formation negotiators are already taking account of a 0.8% figure. The six parties are aiming at a 2012 budget with a budget deficit of only 2.8%. The European Commission has now issued a clear warning: if no action is taken Belgium's deficit will rise to 4.6%.
The EC is not only concerned about lack of progress on the budget. It warns that by 2013 the state debt could rise above 100% of national output once again and adds that the Belgian economy is losing its competitive edge because of excessive wage increases. The Commission says that there is a danger that the markets could lose confidence.
Wider forecasts speak of the entire Union heading for a recession if no thorough action is soon taken.
The Commission is now forecasting 0.5% growth for the Eurozone next year and 0.6% for the EU as a whole. Belgium‘s growth prediction remains above these figures.
In a reaction to the Commission's report Belgian Premier Yves Leterme (Flemish Christian democrat) has again called on the six parties negotiating the formation of a new Federal Government to reach an accord on next year's budget and social economic reforms as soon as possible.