New European budget rules: what do they mean for Belgium?
The European Parliament has approved new budget rules member states will have to stick to. Under the new budget rules, member states must reduce national budget deficits to 3 percent of gross domestic product within 4 to 7 years. For Belgium that means an annual effort of cuts in expenditure and savings of 3.4 billion euros.
European institutions want to monitor member states’ budgets more strictly once again. The old rules were put on hold for a while during the pandemic and were not implemented after Russia's further invasion of Ukraine in 2022.
In April 2023 the European Commission proposed to tighten the reins once again: member states with large budget deficits and debts must follow a so-called "reference path" of 4 to 7 years to reduce the budget deficit to 3 percent. After that, the deficit must get even smaller and should be cut to 1.5 percent of national output.
What does this mean for Belgium?
According to Belgian finance minister Vincent Van Peteghem (Flemish Christian democrat) the new European rules will require Belgium to make an annual effort of 0.57 percent of its gross domestic product. That is an average for a 7-year period. In euros that amounts to an effort of 3.4 billion euros per year.
What is a budget?
A budget is an overview of a government's income and expenditure. The Belgian budget lists the revenues (such as taxes) and expenses (such as investments) of the various governments as well as the social security system.
A budget deficit occurs when there is greater expenditure than revenue. Belgium had a budget deficit of €26 billion in 2023.
That deficit is often expressed in terms of gross domestic product, the value of all the goods and services a country produces. Belgium had a deficit of 4.4 percent of gross domestic product in 2023. That is higher than the norm put forward by the EU.