Bringing Belgian public finances to a sustainable path

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