According to the European Commission, Belgium will have the largest budget deficit in the Eurozone over the next two years.
Belgium would also be the only member of the Eurozone with debt above 100% of GDP to face a debt increase in 2023 and 2024. This situation is due to the country’s support measures to cope with rising energy costs and the automatic wage indexation mechanism, according to L’Echo.
Economy Commissioner Paolo Gentiloni pinpointed the second element as bad for competition. However, the commissioner claims that now is not a good time to change this system.
Gentiloni estimates that the wage indexation mechanism is less controversial under the current circumstances – considering the multiple crises faced today – than it would have been under normal circumstances since it helps respond to a real problem. “Because the social component is more important than in normal times, in the trade-off between the social aspect and competitiveness,” he added.
He believes that Belgium’s situation is not exceptional and he reminded that the EU encourages member states to reduce extraordinary aid spending on energy measures.
Back in September, Belga reported that when presenting Belgium’s financial budget, Belgian Prime Minister Alexander De Croo announced the country’s budget deficit would be reduced by €1.7 billion more over the next two years than it was previously planned.
The deficit is set to reach more than €17 billion in 2023 and more than €20 billion in 2024. A return to more balance still seems far off since the Belgian government believes that the current crisis requires more spending.
In October, De Croo expressed concern about Belgium’s deficit but warned that “not leaving anyone behind means a heavy bill for the government.”
Responding to the criticism regarding the fiscal impact of the measures taken by the government to tackle the crisis, he asked: “What should we have done then? […] Should we have refused aid to the self-employed? Should we perhaps have left our middle class out in the cold?”
This news comes as Eurozone inflation is expected to peak at 8.5% this year before registering a slight drop in 2023.
In Belgium, the Commission forecasts economic growth of 2.8% this year, 0.2% in 2023 and 1.5% in 2024. Inflation should peak at 10.4% this year, falling to 6.2% next year and then to 3.3% in 2024.
Source: euractiv.com
