Belgium needs less austerity to meet EU targets, central bank says

Feb 15, 2012, 14:28 GMT

Brussels - Belgium may need a less severe austerity package to meet European Union deficit targets than previously predicted, the country's central bank said on Wednesday.

Last month, the Belgian government agreed on a temporary 1.3-billion-euro (1.7-billion-dollar) freeze on expenditures to escape the launch of EU sanctions proceedings that could have led to hefty fines.

That would mean the deficit would fall to 3.1 per cent of gross domestic product, the Belgian National Bank (BNB) said in its annual report, and not the 3.4 per cent that had been previously forecast.

The improvement in the figures was due to a change in statistical accounting, which better reflects spending by local authorities, the Belga news agency reported.

But the country still needs 'to find (savings) of 0.3 per cent, about 1 billion euros,' BNB President Luc Coene said, according to Belga.

Belgium has pledged to bring down its 2012 deficit to 2.8 per cent of GDP - a shade under the EU-mandated limit of 3 per cent.

Under a new EU system introduced in response to the debt crisis, euro countries failing to meet budget targets can be forced to pay 0.2 per cent of their GDP into an interest-bearing account, and may lose the money for good if they fail to correct their ways.

To avoid sanctions, the government of Belgian Prime Minister Elio Di Rupo, a Socialist, has adopted austerity measures, angering trade unions.

On January 30, they staged the first general strike in the country for 18 years. The protest was organized on the day of a special EU summit in Brussels that was discussing the eurozone crisis and measures to promote growth and jobs.

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