Annexes to COM(2018)429 - Belgium Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the EU - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2018)429 - Belgium Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the EU. |
|---|---|
| document | COM(2018)429  |
| date | May 23, 2018 |
The Country report highlights as well the reform of the corporate income tax, adopted at the end of 2017, which lowered statutory rates and contributes to simplify the tax system through the revision of possibile deductions and exemptions. Still, many exemptions and distortionary incentives remain and the opportunity to shift taxes to more growth-friendly bases could have been further used. The report also aknowlegdes that, over the course of the last few years some progress has been made regarding a number of challenges. Measures have notably been taken to reverse previous losses in competitiveness. Between 2013 and 2017, various wage moderation policies have been implemented to improve the gradually eroding cost-competitiveness, including a real wage freeze, parametric changes to the indexation calculation mechanism and a temporary suspension of wage indexation agreements. In addition, in the framework of the on-going tax reform, measures have been taken to reduce the tax wedge on labour through gradual decreases in personal income taxation and employers' social security contributions, with more than proportional reductions for lower salaries. The targeting of low wages favours the young and the low-skilled, who tend to have lower wages, but also the lowest employment rates, and thus supports activation for some of the most vulnerable groups. Nevertheless, despite the recent reforms, the Belgian tax system remains hampered by widespread distortions which narrow tax bases and contribute to the system's complexity. Taxation also continues to lean heavily on labour taxation, even after the recent reforms, and additional tax reductions at the lower end of the pay scale would contribute to reducing unemployment and low wage traps for second earners, singles and single parents.
As was already discussed in previous Article 126(3) reports, Belgium has also modernised its public pension system in recent years. Pension reforms were adopted in 2015, reducing early exit possibilities by further tightening the standard eligibility requirements for both early and pre-retirement. The legal retirement age will also rise from 65 to 66 in 2025 and to 67 in 2030. The long-term impact of that set of measures is discernible in the 2015 projections of the Ageing Working Group: pension expenditures are projected to rise by 1.3 pp. of GDP between 2013 and 2060, compared to 3.3 pp. before the most recent reforms. The difference is mostly due to the pension reform itself (-1.6% of GDP). Those more positive ageing projections allowed Belgium to lower its MTO under the SGP from a structural surplus of 0.75% of GDP to a balanced budget in structural terms. While the positive impact of the 2015 pension reforms is not put in question, the forthcoming 2018 projections of the Ageing Working Group project a higher than previously expected increase in the pension expenditure; the upward revision is almost exclusively due to less favourable demographic projections. In 2017 an agreement was reached about the harmonisation of the valorisation of years of study in the three pension schemes, which is estimated to lower the projected increase in ageing costs by 0.1% of GDP in 2060. Thus, although already enacted reforms have substantially reduced the projected rise in public pension spending, curbing the expected increase in age-related spending further through additional reforms would improve fiscal sustainability in the long term. Moreover, there are signs of a strong shift from early exit through the pension and unemployment systems to the sickness and disability schemes, which would partially offset the projected gains from the enacted reforms. Spending on sickness and disability has been rising rapidly: from a broadly stable level of around 1.2% per year until 2007 to 1.9% in 2016. By the end of its term in 2019, the government intends to lay the groundwork for the introduction of a credit-based public pension system as of 2030. Once fully implemented such a system would allow for automatic adjustment mechanisms in response to demographic or economic developments.
4.2. Medium-term budgetary position
The ex-post assessment of Belgium’s compliance with the preventive arm finds that there is currently not sufficiently robust evidence to conclude on the existence of a significant deviation from the adjustment path towards the MTO in Belgium in 2017 and over 2016 and 2017 together. As regards 2018, the fiscal adjustment is not expected to be sufficient to comply with the preventive arm requirements for Belgium.
Headline, structural balance and adjustment towards the MTO
Headline balance
Belgium's headline deficit fell from 2.6% of GDP in 2016 to 1.0% in 2017. The revenue-to-GDP ratio rose by 0.4 pp. of GDP while the expenditure-to-GDP ratio fell by 1 pp. of GDP. The 2017 headline deficit was impacted by additional expenditure related to exceptional security measures in the light of the terrorist threat. According to the Commission, the eligible additional expenditure in 2017 amounted to 0.02 % of GDP.
MTO and structural balance
The 2018 Stability Programme does not provide information on the budgetary impact of the exceptional security-related measures in 2017. However, the Belgian authorities, in a letter dated 9 May 2018, provided adequate evidence of the scope and nature of those additional budgetary costs. According to the Commission, the eligible additional expenditure linked to the security measures amounted to 0.02% of GDP in 2017. The provisions defined in Article 5(1) and Article 6(3) of Regulation (EC) No 1466/97 allow for that additional expenditure to be catered for, in that the severity of the terrorist threat is an exceptional event, its impact on Belgium's public finances is significant and sustainability would not be compromised by allowing for a temporary deviation from the adjustment path towards the MTO. The required structural improvement in 2017 has consequently been reduced from 0.6% of GDP to 0.58% of GDP.
In the 2016 SP, the Belgian authorities revised their MTO to a balanced budget in structural terms, down from a structural surplus of 0.75% of GDP. The MTO appears sufficiently stringent under what can be considered as normal economic conditions to ensure debt rule compliance in the medium and long term. In the 2018 SP, Belgium confirmed the MTO but postponed the planned achievement of it from 2019 to 2020. According to the Commission 2018 spring forecast, this would require a structural improvement of 1.4% of GDP over 2018-2020. At the same time, the Commission forecast expects the structural balance to deteriorate by 0.1 pp. of GDP in 2018 and 0.3 pp. of GDP at unchanged policy in 2019, the last year of the Commission projections. According to the High Council of Finance the implied deterioration in 2020 would represent 0.02% of GDP 7 . As a result, achieving the MTO in 2020 will require substantial additional measures and a strict execution of the budget in view of implementation risks towards the end of the current legislative period.
Compliance with the recommended adjustment towards the MTO
In 2017, Belgium was recommended to pursue an annual structural adjustment towards the MTO – corrected for the impact of unusual events – of at least 0.58% of GDP. Based on outturn data and the Commission forecast, the growth of primary government expenditure, net of discretionary revenue measures and one-offs, exceeded the expenditure benchmark (corrected for the impact of unusual events), leading to a gap of 0.4% of GDP, pointing to some deviation. The structural balance is estimated to have improved by 0.8% of GDP in 2017, 0.2% of GDP above the recommended effort of 0.58% of GDP, pointing to compliance.
However, over 2016 and 2017 together, the average deviations were larger in view of the deviation that was also observed in 2016, when Belgium was recommended to pursue an annual structural adjustment towards the MTO – corrected for the impact of unusual events – of at least 0.47% of GDP. Indeed, over those two years, the deviation based on the expenditure benchmark amounted to 0.5% of GDP, above the treshold of significance. In turn, the structural balance points to a deviation of 0.1% of GDP, pointing to some deviation.
This calls for an overall assessment, in which the following three main factors are to be considered:
First, the change in the structural balance was inter alia positively impacted by lower interest expenditure, contributing to 0.4 pp. of GDP of the change. That windfall improves the reading of the fiscal effort based on the structural balance but does not affect compliance with the expenditure benchmark, which is therefore considered to reflect more appropriately the underlying fiscal effort.
Second, both in 2016 and 2017, the expenditure aggregate was negatively impacted by higher than expected inflation. Whereas the reference growth rate for the expenditure benchmark is based on a GDP deflator forecast of 1.0% for 2016 and 1.5% for 2017, the actual GDP deflator used for the structural balance amounted to 1.6% in 2016 and 1.9% of GDP in 2017. The impact on expenditure growth from higher than anticipated inflation transpired in the fact that the automatic indexation of social benefits and public sector wages occurred earlier than expected in the Commission forecast. While the inflation surprise resulted in higher-than-expected public expenditure, it had a positive impact on tax revenues (as private wages are generally indexed to inflation). However, the expenditure benchmark only captures the expenditure side and thus the negative impact of the inflation surprise, and therefore under-estimates the underlying fiscal effort. The impact of higher inflation was estimated at around 0.2% of GDP for 2016 and 0.1% of GDP in 2017, correcting the GDP deflator for the share of public expenditure directly indexed on inflation. The deviation for the expenditure benchmark would thus be reduced from 0.43% to 0.37% of GDP in 2017 and from 0.5% to 0.4% of GDP over 2016 and 2017 together.
Third, there are substantial uncertainties regarding the treatment of the substantial increase in advanced corporate income tax payments collected in 2017 (around ½ % of GDP in 2017). This revenue increase stems notably from the introduction, in 2017, of significantly higher surcharges for non-payment of advanced tax payments. This measure introduces a permanent change in the timing of recurrent revenue, by shifting -at least in part- tax collection from ex-post tax settlement to advance tax payments, and therefore it creates an exceptional and temporary peak in tax revenue in 2017 8 . In the baseline scenario of the 2018 spring forecast, the Commission considered that any tax collection in excess of the trend was to be considered as a one-off, temporary revenue, which would eventually be offset by lower tax settlement revenue in the following years.
However, other analyses, such as that of the National Bank of Belgium or of the government, consider a higher share of the CIT revenue increase in 2017 as structural. While the Commission acknowledges that this is indeed a possibility which should not be discarded, it considered it as an upside risk rather than a factor to be integrated in the baseline scenario. The uncertainty surrounding this measure is highlighted by the fact that its permanent impact will only be measurable after several years, while the outturn corporate income tax data for 2018 will provide a preliminary indication of the magnitude of the impact.
This issue will remain relevant over the coming years, given that from 1 January 2018 the surcharge rate will further increase, from the current 2.25% to 6.75%, while the currently applicable credit rate rewarding sufficient tax advanced payment will also be adjusted. Advanced payments are thus expected to become considerably more important for companies that are interested in avoiding extra tax liabilities.
Amid such uncertainty as to the future evolution of corporate income tax revenue, it is worth noting that an ex post upward revision of the permanent effect of the measure could considerably improve the assessment of the underlying budgertary position and potentially reduce the deviation from the expenditure benchmark in 2017, bringing it below the significance threshold.
Therefore, in the context of this report, the relatively more conservative stance from the Commission clearly represents a relevant factor to be considered in the overall assessment, given both the magnitude of the extra revenues (around ½ % of GDP in 2017), as well as the high level of uncertainty as regards the extent of their temporary nature.
On that basis, while the deviation from the adjustment path towards the MTO in 2016 and 2017 together remains significant when taking into account the impact of the higher-than-anticipated inflation on the share of public expenditure directly indexed on inflation, the Commission is of the view that, given the high uncertainty regarding the treatment of the additional corporate income tax revenues, there is currently not sufficiently robust evidence to conclude on the existence of a significant deviation in Belgium over 2016 and 2017 together.
In 2018, Belgium is recommended to pursue an annual structural adjustment towards the MTO translating into a nominal growth rate of net primary government expenditure which does not exceed 1.6%, which would correspond to a structural adjustment of at least 0.6% of GDP. Based on the Commission spring forecast, the growth rate of the expenditure aggregate is projected to exceed the expenditure benchmark, leading to a gap of 0.8% of GDP that points to a risk of significant deviation. At -0.1% of GDP in 2018, the projected deterioration in the structural balance also significantly deviates from the recommended structural adjustment. Over 2017 and 2018 taken together, the expenditure benchmark points to a risk of significant deviation, with an average deviation of -0.6% of GDP. The projected average deviation for the structural balance over the same period amounts to -0.2% of GDP according to the Commission forecast, indicating a risk of some deviation.
When correcting for the impact of unforeseen inflation in 2017 discussed supra (estimated at 0.1% of GDP), the deviation for the expenditure benchmark in 2017-2018 remains above the threshold for significant deviation. The remaining difference with the average gap for the structural balance reflects the impact of the decline in interest expenditure in both years. As a result, the overall assessment points to a risk of a significant deviation from the recommended adjustment path towards the MTO in 2018 over 2017 and 2018 taken together.
Public investment
Over the forecast horizon, public investment is projected to rise to 2.5% of GDP due to large investment projects at regional level and an acceleration of local government investment in the run-up to municipal elections in 2018. From 2009 to 2016, public investment was lower than the general government deficit, but the latter fell below the investment ratio in 2017.
The federal government has been pursuing a 'National Investment Pact', which aims to accelerate investment in key areas by mobilising public and private means as well as by identifying obstacles for private investment. Regions and Communities can join the initiative.
4.3. Medium-term government debt position
Debt dynamics
Between 1997 and 2007, Belgium's government debt-to-GDP ratio decreased by 36 pp., thanks to sizeable (although gradually declining) primary surpluses. That trend of sustained debt reduction was halted by the financial and economic crisis of 2008. At the end of 2007, Belgium's general government debt stood at 87% of GDP. It rose to 107% of GDP in 2014, an increase of 20 pp. It compares to an increase of 27 pp. in the euro area.
The main drivers behind the increase between 2007 and 2014 were the upward snowball effect (+10.5 pp.) and stock-flow adjustments (+9.4 pp.), with the erstwhile primary surpluses gone (see Graph 1). The snowball effect reflects how interest spending generally surpassed nominal growth since 2008. Yet, at 1.4 pp. on average, the annual upward impact of that dynamic in 2008-2015 was similar to that in 1997-2007, as the denominator effect of lower nominal growth was offset by the nominator effect stemming from lower interest spending in terms of GDP. The latter ratio continued to decline after 2007 as continuously declining interest rates compensated for an increasing debt ratio. A further decline in interest spending in recent years resulted in a slightly downward snowball effect in 2016 for the first time since 2011.
Graph 1. Drivers of "snowball effect" on government debt
The substantial debt increase due to stock-flow adjustments occurred predominantly in 2008 and 2011, when the Belgian State had to intervene in the financial system. In 2008 authorities had to step in to save Fortis, KBC, Dexia and Ethias. In 2011 the Belgian State acquired Dexia Belgium, the current Belfius bank. The recovering of part of the financial sector bailout resulted in downward stock-flow adjustments representing 3.9% of GDP in 2012-2017. Remaining participations include a share of 7.8% in BNP Paribas, 100% of Belfius, 100% of insurer Ethias (including stakes of regional and local authorities), and 50% of Dexia bank. Dividends paid by financial institutions represented about 0.1% of GDP in 2017.
The negative stock-flow adjustment of 0.1% of GDP in 2017 mainly reflects interest rate swaps, income from the sale of shares in BNP Paribas, the difference between accrued and paid interest and regional loans for social housing.
While the accumulated impact on the debt ratio from the primary balance has been about zero since 2008, the contrast with the situation prior to 2008 is striking. Between 1997 and 2007 the attainment of substantial primary surpluses allowed for an annual debt reduction of around 5 pp. In that respect, the disappearance of the primary surplus can be considered the main driving force behind the increase in the debt ratio since 2007. It highlights how the return to substantial primary surpluses is a precondition for putting debt on a clear downward trajectory and complying with the debt reduction benchmark.
According to the Commission 2018 spring forecast, the debt-to-GDP ratio would fall by 1.6 pp. in 2018. A primary surplus of 1.2% of GDP and a sizeable downward snowball effect of 1.1% of GDP as a result of rising nominal growth and decreasing interest expenditures are partially offset by upward stock-flow adjustments stemming from loans at the regional level for the financing of social housing investment and interest rate swaps. The same trend is expected in 2019 when debt would decrease to 100.2% of GDP at unchanged policy.
Interest expenditure
In line with the general trend in the euro area, interest rates on Belgian debt instruments are at historical lows. The ten-year bond yield averaged 0.85% during the first quarter of 2018. The spread between Belgian and German bonds has been broadly stable for several years. It averaged 32, 37, 41 and 30 basis points in 2015, 2016, 2017 and the first quarter of 2018 respectively, compared to a maximum of 366 basis points at the end of November 2011. The implicit interest rate declined steadily in recent years, from 4.6% in 2007 to 2.4% in 2017. It is projected to decline further to 2.1% in 2019.
Debt sustainability
Graph 2 : Debt projections in successive stability programmes (% GDP)
Belgian authorities have been using favourable market conditions to refinance the outstanding debt against much lower rates at considerably longer maturity. The average maturity of long-term issuance remained at a high level at 15 years in 2017 (17.5 years in 2016 and 13.6 years in 2015) with an average weighted yield of 0.9% (0.8% in 2016 and 0.9% in 2015). As a result, the average life to maturity of the total federal debt portfolio 9 rose to 9.3 years at the end of 2017 and 9.2 years at the end of February 2018 10 . It is the longest ever and compares to around 6 years until 2009 and 8 years at the end of 2015 11 . The 12-month and 60-month refixing risk 12 of the federal debt decreased from around 20% and 57% at the end of 2012 to around 18.5% and 41.9% at the end of 2017 13 . Currently, Belgium does not appear to face a risk of financial stress in the short term. If interest rates were to start rising, the high debt level implies a substantial hike in interest expenditure over time, though the high average life to maturity means that that hike would materialise only gradually.
The sensitivity to potential shocks in nominal growth and interest rates as well as the unfavourable starting point result in high sustainability risks in the medium term. At unchanged policy, the debt level is projected to decline to 94.8% of GDP by 2028 14 . A 1 pp. increase in the interest rate assumptions or 0.5 pp. lower GDP growth would bring the debt level to 100% of GDP in 2028. Adequate progress towards Belgium's MTO, as required by the Stability and Growth Pact, would put the debt on a sustained downward path, arriving at 76% of GDP by 2028. However, the fiscal effort required for reaching the MTO is substantial, considering that the structural deficit is estimated at 1.6% of GDP in 2019 at unchanged policy. Moreover, rising expenditure might require additional measures once at the MTO.
Lastly, the sustainability of public debt is also determined by the economy's growth potential. As described above, the gradual decline of total factor productivity growth since the beginning of the 1990s has lowered potential growth. It underscores the importance of implementing structural reforms in order to boost potential growth. Progress with regard to reforms was discussed in Section 4.1.
4.4. Other factors considered relevant by the Commission
Among the other factors considered relevant by the Commission, particular consideration is given to financial contributions to fostering international solidarity and achieving the policy goals of the Union, the debt incurred in the form of bilateral and multilateral support between Member States in the context of safeguarding financial stability, and the debt related to financial stabilisation operations during major financial disturbances (Article 2(3) of Regulation (EC) No 1467/97).
Rescue operations in the financial sector explain part of the debt increase since 2007 as discussed in section 4.3. The direct cumulative debt impact of those operations reached almost 7% of GDP in 2011 but declined to around 3% of GDP as of 2017 due to the sale of some of the acquired assets as well as the reimbursement of loans. Contingent liabilities related to guarantees granted to the financial sector all relate to Dexia. Awaiting full resolution, the Belgian State guarantees 51.4% of Dexia's liabilities. Those guarantees reached 7.8% of GDP as of April 2018, down from 8.7% at the end of 2016.
Article 12(1) of Regulation (EU) No 473/2013 requires that this report considers also "the extent to which the Member State concerned has taken into account the Commission's Opinion on the country's Draft Budgetary Plan, as referred in Article 7(1)" of the same Regulation. The Commission Opinion on Belgium's draft budgetary plan for 2018 pointed to a risk of non-compliance with the provisions of the SGP in 2017-2018 and invited the authorities to implement all planned measures within the national budgetary process and to ensure that the 2018 budget complies with the SGP. The federal budget was adopted by Parliament on 14 December 2017 without major changes compared to the Draft Budgetary Plan. In March 2018 the federal government carried out a budget review, which largely consisted of updated assessments of earlier announced measures and of underlying assumptions, with some additional spending and revenue measures announced as well. The overall impact of the March review on the Commission projections is estimated at 0.1 pp. of GDP in 2018.
4.5. Other factors put forward by the Member State
On 9 May 2018, the Belgian authorities transmitted a letter with relevant factors in accordance with Article 2(3) of Regulation (EC) No 1467/97. The analysis presented in the previous sections already broadly covers the key factors put forward by the authorities.
On top of reforms in the area of competitiveness, the federal government highlights the tax shift away from labour in 2015-2020 as well as planned changes to the pension system such as a reform of assimilated periods, the extension of the second pension pillar to all workers and the introduction of a partial pension. The authorities also highlight the planned increase in public investment through a national strategic investment pact, which is expected to support potential growth. In their letter, the Belgian authorities also point to the fact that the debt ratio has fallen since 2015 and would continue decreasing. The letter highlights the upward impact that weak growth, support to financial institutions, lending to Greece and contributions to the EFSF/ESM have had on the debt ratio. According to the authorities' calculations, the budgetary path presented in the 2018 SP should enable compliance with the debt criterion by 2018.
Furthermore, the authorities invoke exceptional costs related to the refugee situation and security measures. While they are neutralised with respect to the adjustment path towards the MTO through the application of the unusual event clause (see section 4.2), they have an impact on the headline balance and thus on public debt developments. Overall, the exceptional costs amounted to 0.3% of GDP in 2017 according to the authorities. The letter provides adequate evidence of the scope and nature of those additional budgetary costs linked to the exceptional security-related measures. According to the Commission, the eligible additional expenditure linked to the exceptional security measures amounted to 0.02% of GDP, in 2017. The provisions defined in Article 5(1) and Article 6(3) of Regulation (EC) No 1466/97 allow that additional expenditure to be catered for, in that the severity of the terrorist threat is an exceptional event, its impact on Belgium's public finances is significant and sustainability would not be compromised by allowing for a temporary deviation from the adjustment path towards the MTO. The required structural improvement in 2017 has consequently been reduced from 0.6% of GDP to 0.58% of GDP.
The letter also provides some explanatory factors for the significant rise in corporate income tax advanced payments in 2017. On the one hand, it is presented as the result of a structural increase in advance payments due to, among other things, the reduced notional interest deduction rate and the increase in the gross operating surplus of companies. On the other hand, the government considers there is a one-off effect due to a shift from tax enrolments to prepayments as a result of the increased penalty for companies that do not make advance payments as from 1 January 2017.The letter argues that the high tax payments received in the first quarter of 2018 lend additional credibility to the authorities' assumption.
Finally, the authorities detail the main factors behind the higher-than-expected inflation in 2017, which can be mostly explained by a strong year-on-year increase in the price of energy products.
5. Conclusions
General government gross debt stood at 103.1% of GDP at the end of 2017, well above the 60% of GDP reference value. Belgium did not comply with the debt reduction benchmark in 2017. Moreover, the Commission forecast does not expect Belgium to comply with the debt reduction benchmark either in 2018 or in 2019, based on a no-policy-change assumption. This suggests that before consideration is given to all relevant factors, the debt criterion as defined in the Treaty does not appear to have been fulfilled prima facie in 2017. In line with the Treaty, this report also examined the relevant factors.
Based on an overall assessment of compliance with the preventive arm, and given large uncertainties related to key factors of fiscal performance in 2017, there is no sufficient evidence to conclude that Belgium is non-compliant with the required adjustment path towards the MTO in 2017 and over 2016 and 2017 together. However, Belgium is assessed to be at risk of significant deviation in 2018 and over 2017 and 2018 together. Hence, the necessary measures should be taken as of 2018 to comply with the provisions of the Stability and Growth Pact. The use of any windfall gains to further reduce the general government debt ratio would be prudent.
Belgium has made progress in implementing the structural reforms announced since the beginning of 2015, notably in the area of pensions, competitiveness and taxation. For several of those reforms progress is considered substantial. They are expected to contribute to enhancing the economy's growth potential and reducing the risks of macroeconomic imbalances, thereby having a positive impact on debt sustainability in the medium to long term. The non-budgetary neutral nature of the tax reform undertaken has worsened the budgetary position, though. In a letter sent to the Commission on 9 May 2018, the Belgian authorities highlighted their commitment to continue structural reforms, in particular regarding the pension system and the implementation of a strategic public investment plan.
Finally, unfavourable economic conditions in the recent past partly explain non-compliance with the debt criterion in 2017. However, economic conditions have been improving and are no longer considered a mitigating factor in explaining Belgium's gap compared to the forward-looking dimension of the debt reduction benchmark in both 2018 and 2019 according to the Commission forecast.
The analysis presented in this report includes the assessment of all the relevant factors and notably: (i) the previously unfavourable but improving macroeconomic conditions, which makes them less of a factor to explain Belgium's large gaps as regards compliance with the debt reduction benchmark; (ii) the fact that there there is currently not sufficiently robust evidence to conclude on the existence of a significant deviation in Belgium in 2017 and over 2016 and 2017 together; and (iii) the implementation of growth-enhancing structural reforms in recent years, several of which are considered substantial and projected to help improve debt sustainability. Overall, as there is currently not sufficiently robust evidence to conclude on the existence of a significant deviation in Belgium in 2017 and over 2016 and 2017 together, the current analysis is not fully conclusive as to whether the debt criterion as defined in the Treaty and in Regulation (EC) No 1467/1997 is or is not complied with. However, the adjustment in 2018 appears inadequate to ensure compliance with the adjustment path towards the MTO in 2018 based on the Commission 2018 spring forecast. The Commission will reassess compliance on the basis of the ex-post data for 2018 to be notified in Spring 2019.
(1) 1 OJ L 209, 2.8.1997, p. 6. The report also takes into account the “Specifications on the implementation of the Stability and Growth Pact and guidelines on the format and content of stability and convergence programmes”, adopted by the Economic and Financial Committee on 5 July 2016, available at:
http://ec.europa.eu/economy_finance/economic_governance/sgp/legal_texts/index_en.htm .
(2) 2 Regulation (EU) No 473/2013 of the European Parliament and of the Council on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area (OJ L 140, 27.5.2013, p. 11).
(3) According to Regulation (EC) No 479/2009, Member States have to report to the Commission, twice a year, their planned and actual government deficit and debt levels. The most recent notification of Belgium can be found at: http://ec.europa.eu/eurostat/web/government-finance-statistics/excessive-deficit-procedure/edp-notification-tables.
(4) Eurostat news release No 69/2018, http://ec.europa.eu/eurostat/documents/2995521/8824490/2-23042018-AP-EN.pdf/6e5b346e-e302-4132-920a-854b00ac196d
(5) Compliance with the debt benchmark is assessed on the basis of three different configurations: the backward-looking, the forward-looking and the debt reduction benchmark adjusted for the impact of the cycle.
(6) Stability Programme Belgium 2018-2021, p. 20.
(7) High Council of Finance (2018), Avis 'Trajectoire budgétaire en préparation du Programme de Stabilité 2018-2021'. Based on data provided by the Federal Planning Bureau.
(8) European Commission, Report on Public Finances in EMU 2015, p. 58.
(9) The federal debt represents 84% of the general government debt.
(10) Belgian Debt Agency, Annual report 2017.
(11) Belgian Debt Agency, Borrowing requirements & Funding plan 2018.
(12) The proportion of outstanding debt which matures in a given time period or which is subject to changes in interest rates because of a floating interest rate.
(13) Belgian Debt Agency, Borrowing requirements & Funding plan 2018.
(14) 2017 Debt Sustainability Monitor. Those projections start from the European Commission 2018 winter forecast, with the no-policy change assumption translated into a structural primary balance kept constant (excluding ageing costs) at the level of the last year of the forecast (2019). The baseline scenario is based on the following macroeconomic assumptions for the long term: potential GDP growth remains around 1.4%; inflation and the change in the GDP deflator stabilise at 2% in the medium term; long-term interest rates on new and rolled-over debt converge to 3% in real terms by 2026 and short-term rates to a value consistent with the long-term interest rate and historical (pre-crisis) euro area yield curve (see also European Commission, 2012). Projected ageing costs are based on the 2015 Ageing Report.