Belgium agrees savings, asset sales to meet EU budget demands

Belgium agreed to make 1.4 billion euros ($1.8 billion) of savings and to sell 1 billion euros of state-owned assets on Saturday, as it strives to meet EU budget targets and avoid being drawn into the euro zone's debt crisis.

With debt approaching 100 percent of national output (GDP), Belgium has some of the weakest public finances in the euro zone's northern "core", partially due to an almost two-year political stalemate that was only resolved in late 2011.

Its six-party government has taken steps since but, like other euro zone members, looks set to miss the targets set by the European Union due to poor economic growth. 

The 1.434 billion euros, an addition to 2013 savings already announced last year, will reduce the country's structural deficit - a measure of the underlying shortfall on public finances allowing for the ebb and flow of the economic cycle - by 1 percentage point, it said. "The government repeats its wish to bring its budget into structural balance by 2015. This is a new, important step to reach that goal," Prime Minister Elio Di Rupo told a news conference, hours after an early morning breakthrough.

Olli Rehn, EU Commissioner for Economic and Monetary Affairs, gave clearance in the past week for Belgium's deficit this year to be greater than the planned 2.15 percent of gross domestic product (GDP), according to government sources. But Belgium still needs to reduce its structural deficit, excluding one-offs and smoothing for cyclical factors, to 1.8 percent, keep its overall debt level below 100 percent of GDP and achieve a structural budget balance by 2015.

The additional savings, a huge series of measures ranging from a reduction in support for the national railway operator to an increase in duty on tobacco, would result in an overall budget deficit of 2.46 percent of GDP.

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Belgium would need to find a further 1 billion euros from asset sales to ensure national debt did not rise beyond 100 percent of GDP (...). Belgium did little in the way of budgetary consolidation in 2010 and 2011, due to the absence of a fully fledged government after an inconclusive election. But despite a spike in its borrowing costs at the end of 2011, economists say it now belongs firmly to the safer "core" of the euro zone.

Reuters

EU launches debate on 2030 targets

The European Commission has officially launched what promises to be a contentious debate over greenhouse gas reduction and renewable energy targets for 2030. In releasing its "green paper" on a 2030 framework for climate and energy policies Wednesday, the commission kicked off a three-month process during which it will gather feedback from member states, industry players, environmentalists and others as it seeks to extend climate change efforts beyond the current binding 2020 targets. The European Union sees the 2030 framework as an interim step along the path to its ambitious low-carbon energy "road map" for 2050, which envisions reducing greenhouse gas emissions to 80-95 percent less than 1990 baseline levels.

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EU leaders avoid clashes

The first day of a lacklustre EU summit dedicated to economic issues ended last evening (14 March) with France and Italy winning support for a slightly more growth-friendly interpretation of European Union budget rules.

France's push for a more growth-friendly interpretation of EU budget rules appears to have paid off. French officials said they were satisfied with the summit conclusions, which state that "the possibilities offered by the EU's existing fiscal framework to balance productive public investment needs with fiscal discipline objectives can be exploited in the preventive arm of the Stability and Growth Pact”.France's budget deficit will hit 3.7% of gross domestic product this year, missing the 3% target.

German Chancellor Angela Merkel was careful to avoid any ideological clash, telling reporters: "We made clear in a very consensual discussion that budget consolidation, structural reforms and growth are not in contradiction but are mutually reinforcing." She appeared to give ground to detractors who criticised her for ignoring calls for a more growth-friendly approach to EU budget rules, saying: "We have decided on a growth pact in the summer of last year and now this growth pact has to be filled with life. The money is there but it has to reach the people, so the young people in Europe get jobs and we still do everything to become competitive and grow."

French officials told journalists that implementation of the European Growth Pact, agreed in June last year, was more important that “reinventing growth” at every new summit meeting. France attaches special importance to the €120-billion Growth Pact agreed last June, which is largely funded by unused structural funds and European Investment bank financing. The implementation of the Pact, which will secure for France projects to the value of €12 billion, is due in June despite doubts over its effectiveness in the short term.

The situation in Italy, where fiscal consolidation and austerity have led to a political stalemate following the elections, appears to be taken in consideration by EU leaders. “The Italian elections are an indication that we should listen to what the peoples of Europe are telling us,” a French diplomat said.

European Council President Herman Van Rompuy said leaders were “fully conscious of the debate, the mounting frustrations and even despair of people. He said the EU’s overall economic strategy had four stands: Restoring financial stability, ensuring sound public finances, urgently fighting unemployment, and reforming for long-term growth and competitiveness. “These four strands are clear and consistent, and we need all four at the same time,” Van Rompuy said. 

Mirroring statements made by French diplomats, Van Rompuy said that growth would not come for free, but rather as a result of fiscal consolidation. “Growth and jobs are not things governments can buy or summon. It is our overriding objective, a result, for which we have to keep striving. The question is finding a good balance, setting priorities, making the right choices. That's what our discussion was about,” Van Rompuy said.

European Commission President José Manuel Barroso said he had put on the table a whole series of proposals to stimulate growth, but lamented that their implementation was “too low and too slow”. He said he welcomed wording in summit conclusions that call for the Council and the European Parliament to move quicker to implement many of those measures. Among them, he mentioned the Compact for Growth and Jobs and the Youth Employment Initiative.

Analysts say the Youth employment initiative, worth €6 billion, is far too small to make an impact, amounting to barely €100 for each young person without a job across the 27 EU states.

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