OECD advises Belgium to adapt automatic wage indexation system

The Organisation for Economic Cooperation and Development has a piece of advice for Belgium. The automatic wage indexation is affecting the competitiveness of our companies and should be adapted, the OECD suggests. The suggestion could be good news for employers, but bad news for Belgian consumers.

The findings do not come as a surprise and confirm an earlier trend: the OECD points to the fact that inflation in Belgium is still high, due to a number of factors like rising energy prices. The social talks between employers and trades unions resulted in an accord under which the wages should not go up too much, but the automatic wage indexation system was kept. This, together with the rising inflation and a higher cost of living, resulted in higher wages after all, which is now affecting the competitiveness of Belgian businesses, the OECD writes.

The Belgian government should think about adapting the wage indexation system, the OECD concludes. However, the wage indexation has been a bone of contention for some time in the ruling federal coalition. The Flemish liberals have suggested making changes to the system at several occasions or even scrapping it altogether, but the Francophone and Flemish socialists demand that the system be kept at all cost. The Flemish Christian democrats suggested a solution "in between", with Finance Minister Steven Vanackere proposing to keep the system, but to skip one indexation round to give employers more breathing space.

In its latest economic outlook, the OECD expects the economy in the euro zone to shrink 0.1 percent. In November last year, it expected a growth of 0.2 percent. "The crisis in the euro area remains the single biggest downside risk facing the global outlook", the OECD thinks.