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Bringing Belgian Public Finances to a Sustainable Path

Author

Listed:
  • Tomasz Koźluk

    (OECD)

  • Alain Jousten

    (University of Liège)

  • Jens Høj

    (OECD)

Abstract

Economic growth is projected to be strengthening from mid-2011 onwards, but will be insufficient to restore the sustainability of public finances. The Belgian strategy to prefund ageing costs by generating fiscal surpluses to bring down public debt was derailed by the global crisis. Restoring the strategy is a priority, especially as spreads on Belgian debt have increased. This will require cuts in public spending, improving efficiency of policies, containing the growth of ageing-related costs and making the tax system more conducive to growth. While past experiences, such as in the 1990s, have shown that successful large consolidations are feasible, the task seems even more difficult this time as potential growth will be muted and interest rates are likely to increase. In this context, a credible fiscal consolidation plan requires the participation of all governments. Its effectiveness can be strengthened by improving the fiscal framework, in particular by introducing multi-year budgets, annual expenditure rules consistent with long-term targets and an enhanced role of an independent fiscal policy watchdog. Mettre les finances publiques belges sur la voie de la viabilité On prévoit un renforcement de la croissance à partir du milieu de 2011, mais il ne suffira pas à rétablir la viabilité des finances publiques. La stratégie suivie par la Belgique, qui consistait à préfinancer le coût du vieillissement en dégageant des excédents budgétaires permettant de diminuer la dette publique, a été compromise par la crise mondiale. En revenir à cette stratégie est une priorité, d’autant plus que la prime de risque sur les taux d’intérêt de la dette belge a augmenté. Cela exigera de faire des économies, d’améliorer l’efficience des politiques publiques, de contenir la hausse des charges liées au vieillissement de la population et de rendre le système fiscal plus favorable à la croissance. Les expériences passées, par exemple celle des années 1990, ont démontré la possibilité d’effectuer un assainissement en profondeur, mais la tâche semble cette fois plus difficile ; en effet, la croissance potentielle sera très modérée et les taux d’intérêt vont probablement augmenter. Dans ces conditions, pour qu’un plan de redressement budgétaire soit crédible, tous les gouvernements doivent y participer. On peut lui donner plus d’efficacité en améliorant le cadre d’action, notamment par l’instauration de budgets pluriannuels et la fixation de règles de dépenses annuelles conformes aux objectifs à long terme ainsi qu’en faisant jouer un rôle accru à une entité indépendante chargée de surveiller la politique budgétaire.

Suggested Citation

  • Tomasz Koźluk & Alain Jousten & Jens Høj, 2012. "Bringing Belgian Public Finances to a Sustainable Path," OECD Economics Department Working Papers 954, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:954-en
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    File URL: https://doi.org/10.1787/5k9b7bxqvgvh-en
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    Keywords

    Belgique; Belgium; budgetary rules; conseil fiscal; dette publique; finances publiques; fiscal councils; fiscal federalism; fiscal sustainability; fédéralisme fiscal; public debt; public finances; règle budgétaire; social security; sécurité sociale; tax policy; viabilité budgétaire;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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