Wednesday, 8 October 2014

A new kid in town

 This Saturday Belgium will have a new government, 139 days after the last elections.  That is only a quarter of the length it took last time, in 2010 and 2011. The new centre-right coalition is promising budget cuts and socio-economic reforms. And it will have the youngest prime minister in Belgian history.
 Twenty six hours of uninterrupted negotiations were needed, before on Tuesday the 7th the story broke, perfectly timed a few minutes before the evening news: four political parties – two liberal ones (MR and VLD), plus the Flemish nationalists (NVA) and the Flemish Christian democrats(CDV) - had reached an agreement to start a new federal government. The two co-formateurs, Kris Peeters and Charles Michel, came out of Parliament House to announce it, and made immediately clear that the latter, the 38-year old president of the French-speaking liberals of MR, would become the next prime minister.
The agreement was mainly about cuts and reforms. Contrary to what the previous government – with the socialists – promised to the ever-watching European Commission, Belgium will not reduce its annual budget deficit to zero in 2016, but two years later. The remarkable thing is that it was first the hard-line Flemish nationalists who proposed the move, and the other parties who picked it up. It is not sure the EU will agree, although overthere the discussion about right and wrong in economic policies is in full swing.
The decision has been taken, it is said, to create room for even more urgent reforms: the lowering of social charges paid by employers on wages (going on average from 33 % to 25 %), a tax shift away from charges on labour for a total value of about 1% of gdp, and a one-time general wage freeze next year diminishing salary charges with another amount nearing 0.7 % of gdp. One charge for employers is going slightly upwards: an extra month salary for employees who remain sick for more than one month. This last measure should reduce costs in the sickness insurance.
An unexpected breakthrough was achieved regarding retirement. The age is now fixed at 66 years from 2025 onwards and on 67 years from 2030. Almost all limits on working after retirement – and while keeping your pension – will be lifted. Further budget cuts will be made in the sickness insurance, but no more in unemployment.
The biggest budget cuts have to be obtained by not replacing two out of three of the vast number of officials who retire in the coming years. Some new taxes will be introduced, like a slight raise of the tax on stock market transactions, a further raise of taxes on diesel fuel, and a spectacular novelty: charges on fortunes that are transferred through companies towards countries that are labelled ‘fiscal paradises’. It is already called the Cayman-tax.
It is an ambitious programme for the first genuine centre-right government in Belgium in more than 25 years. Much will depend on the persons mr. Michel and his colleagues will choose as minister. And of course of the positioning of his own party as the only French-speaking one on board, representing only 20 out of the 63 French-speaking deputies in the federal parliament.

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