Social partners react strongly to state austerity measures
Trade unions and employer organisations have reacted strongly to the harsh austerity measures facing the Belgian federal state, voicing opinions on where to implement the cost-cutting measures. The employer organisations propose cuts in the civil service, while fiercely opposing the introduction of new taxes. Trade unions, on the other hand, strongly defend the social security budget and have put forward a wide range of alternative proposals.
The Belgian government is currently engaged in implementing austerity measures to combat the severe impact of the global economic crisis, as well as the rapidly rising national debt. The federal coalition government comprises the Christian Democratic and Flemish Party (Christen-Democratisch en Vlaams, CD&V), the Humanist Democratic Centre (Centre démocrate humaniste, CDH), the liberal parties the Flemish Liberals and Democrats (Vlaamse Liberalen en Democraten, VLD) and the francophone Reformist Movement (Mouvement Réformateur, MR), along with the Socialist Party (Parti Socialiste, PS).
Major budgetary challenges
The country’s state budget deficits are rising rapidly as a result of a sharp decline in tax revenue, combined with costs associated with this year’s economic stimulus package (BE0901019I) and the extensive aid given to the financial services sector. Belgian banks have been hit hard by the financial crisis, with Dexia, Fortis and KBC all receiving capital injections from the government (BE0812019I). For the first time in over a decade, Belgium is running primary deficits again – that is, an excess of expenditure over total revenue, excluding interest payments on debt. The budgetary challenge is further intensified by Belgium’s stock of public debt measured as a share of national income, which is already one of the highest among the member countries of the Organisation for Economic Co-operation and Development (OECD). In addition, the societal demands pertaining to the needs of an ageing population are putting a further strain on the country’s finances.
On 17 September 2009, at the Consultation Committee, the federal government reached an agreement with all of the country’s regional governments on how to divide up the €10 billion in budget cuts over the next three years. The regions and municipalities will bear 35% of the cuts, corresponding to a total of €3.5 billion, while the federal government and social security services will meet 65% of the cuts, or €6.5 billion. Over the next two years, Belgium will save 1.5% of its gross domestic product (GDP), corresponding to a total of €5.1 billion. As of 2012, this amount will be slightly reduced, amounting to 1.3% of the annual GDP, or €4.5 billion. These agreements were reached within the framework of the complement to the Stability Programme covering the period 2009–2013, which was submitted to the European Commission.
Proposed government measures
Currently, a vigorous debate is underway in Belgium on where to implement public spending cuts or on how to generate new financial resources for the state. Present suggestions by the government parties include an annual tax on pension savings, the introduction of a ‘crisis tax’ for banks and keeping the nuclear power stations open for an extended period. The liberal government parties are calling for no additional taxes but for more savings, especially in social security provisions. The left-wing PS, on the other hand, opposes any cuts in the field of healthcare, unemployment benefits and pensions; the socialists thus interpret the requirements of the Stability Programme 2009–2013 in a different light.
Employers call for structural reforms
The Belgian Federation of Employers (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO) welcomed the proposed government measures to cut public expenditure in Belgium in the next few years. FEB/VBO agrees with the government’s reasoning of first ensuring an economic recovery before introducing stringent cost-reducing measures. The employer organisation underlines, however, that structural reforms are required, including in the civil service, in order to prepare the country’s economy for future challenges. To achieve a balanced budget, FEB/VBO suggests that the government should reduce the size of its own civil service. The Belgian government could save up to €5 billion if it cuts back its own administration costs to reach similar levels as in neighbouring countries, according to a new FEB/VBO study on the country’s economic situation (in Flemish). In Belgium, government expenditure amounts to 7% of GDP, compared with an average of only 5.5% in its neighbouring countries. The high operational expenditure can be attributed to the large number of civil servants, which has increased by 19.5% since 1995. Belgium employs four civil servants for every 100 citizens, compared with 3.7 civil servants in France, 3.4 in Germany and 2.9 in the Netherlands.
Furthermore, FEB/VBO has called on the government to boost investment by implementing a single tax deduction next year, instead of spreading tax deductions for investments across several years, as it is currently the case. In terms of funds, nuclear power stations that will remain open will yield profits for the government in the form of energy taxes. FEB/VBO advises the government not to use these funds to fill the budget gap, but to use them to compensate companies for the expensive green electricity that they buy.
Trade unions demand fair distribution
The Belgian General Federation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV) demands that the cost-cutting measures should be distributed in an equitable and fair way across society. According to the socialist trade union FGTB/ABVV, one does not have to look far to see what caused this hole in the country’s budget: bailing out the banks has cost the state €21 billion. FGTB/ABVV believes that the working population alone should not have to bear the consequences of this bill. The financial and economic crisis has negatively impacted on people’s purchasing power and caused wide-scale unemployment. FGTB/ABVV criticises the employer organisations for proposing to do away with bridging pensions, as suggested by the Flemish Organisation of the Self-Employed (Unie van Zelfstandige Ondernemers, UNIZO). The trade union is also against the proposal to make the payment of pensions dependent on life expectancy, as put forward by FEB/VBO, in addition to claiming a once off fiscal deduction of their investments over one year. FGTB/ABVV insists that the annual growth norm in healthcare spending of 4.5% should be maintained and that the government should avoid implementing linear cost cuts which affect lower income population groups to a much greater extent than higher income groups. Furthermore, the socialist trade union believes that it is high time for the banks to pay a ‘crisis tax’ – an idea that the majority parties in the government have taken up.
The Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC/ACV) emphasises largely the same points. On 25 September, CSC/ACV has issued a dossier (in Flemish, 254Kb PDF) on the country’s budget deficits and the challenges involved, as well as on how to cope with these. For CSC/ACV, it is unacceptable to rescue the social security budget by reducing unemployment benefits. The trade union believes that the ‘strongest shoulders’ must bear the heaviest burden and not vice versa. Therefore, it calls for revising a range of current tax deductions, such as those related to private pension insurances. Overall, CSC/ACV highlighted that:
This is the worst economic crisis ever. One that we have to overcome with unified efforts. Everybody shall have to contribute to these efforts. We have never denied that workers shall also contribute to make efforts, but only when others equally pay their share.
Protest action day
Meanwhile, the trade unions have joined their efforts and issued a joint statement outlining the demands that they raised in September. To support this statement, the trade unions organised an Action day (in Flemish) on 9 October – several days before Prime Minister Herman Van Rompuy presented his ‘state of the union speech’ in the Belgian parliament.
Guy Van Gyes, Higher Institute of Labour Studies (HIVA), Catholic University of Leuven (KU Leuven)