Yes, a global agreement on institutional reform

At 1 a.m. on Saturday morning the negotiators for a new government in Belgium finally agreed on the last issue in a large package deal on the institutional reform  of the country. It took Belgium 480 days of negotiations to reach that stage, in some way even more than 4 years. This should clear the way for a new government, that might take its powers before the end of the month.

It was in a rather sober setting that the negotiators came out of the federal Parliament Friday night after they had cut their last deal on institutional reform. This was exactly 22 days after they had reached a first breakthrough, on September the 15^th. The institutional reform that the next government will have to work out consists of:

 1)The devolution of new competences to the regions: among these the competences to pay children benefits (although the amounts per child must remain the same), and some competences concerning health care and policies for the labour market

2) A new Finance Law, that will enforce the economic base for revenues for the (socio-economic) regions, but will weaken this as far as the revenues of the communities (education, culture, health care) are concerned. In general the mechanisms of distributing money from the federal to the regional entities should become more transparent. Fiscal autonomy is slightly enforced

3) Political reform. The Senate will be reduced in power and number of mandates, elections will take place every five year (instead of 4 now) and be held as much as possible for all administration levels together, and new ministers will have to pass screening by parliament before starting their new job.

4) Slightly more coordination in the Brussels region. Mobility and security will be slightly more organised by the Brussels region, to the detriment of the communes. Brussels will get an extra subsidy of about 450 million €.

5) Brussels-Halle-Vilvorde. This largest electoral and justice district of Belgium, the only real bilingual one, will now be split up, but with some protection guarantees for the French-speaking citizens outside the capital (inside the Flemish region), especially in the six communes with a large French-speaking population 

The text of the whole agreement will be read and finalised Monday by the presidents of the eight political parties (Christian democrats, socialists, greens and liberals), and made public Tuesday by formateur Elio di Rupo. As far as the Finance Law is concerned, the proposals did not take into account (yet) the deep budget cuts that the parties will have to agree upon before forming the new government in the next weeks.

So Belgium, that seemed to succumb in the worst economic crisis in 80 years, has finally – and at least for the moment - shown more resilience than many still dared to expect after the elections last year. But for all the time it took, the institutional agreement is certainly no breakthrough towards a redrawing of the complex institutional landscape of Belgium. This hope, that existed in June 2010 with (only) two undisputed winners of the elections , and after the previous government had failed on institutional reform for three years, did in the end not materialize.

What is now agreed is simply the sixth stage of the institutional reform-process of Belgium that was embarked on in 1970 and that, at each stage, saw gruesome compromises worked out to bridge the growing gap between Flemish and French-speaking parties (and the electorate beyond) in the country. The administration in Belgium will in no way become simpler or more transparent. The biggest achievement is probably the agreement on the 40-year old question of BHV, which might now finally be reduced to what it in fact always was: a matter of local politics.   



Just a few details to fix ...

The eight political parties that have been negotiating a new government in Belgium, seem now bound to succeed. They are about to conclude a package deal about many of the institutional questions that have been pending for the last decade. Towards the end of the week, after about 480 days of negotiations, they still have to tackle all the other issues, including budget cuts for next year for a total amount of at least 7 billion euro’s.

The eight parties (socialists, liberals, Christian democrats and greens of both sides of the country) reached another deal last night. They accepted a scenario to split up the justice district of Brussels-Halle-Vilvoorde, by far the largest of the country and the only really bilingual. The deal was in some sense a consequence of the earlier agreement, reached on September the 15^th, to split up the electoral district with the same name. But it took again a few nights before the highly symbolic knots in the question were cut into pieces.

A week ago another hard institutional nut was cracked: a new Finance Law that would devolve some extra fiscal autonomy toward the regional authorities. The principles to do this were agreed, and the agreement was facilitated by the fact that the negotiators did not take the necessary budget cuts into account yet. Hence it was possible for all participants to say they had won.

It has to be said that the exact wording of all the institutional agreements reached since the middle of September is yet not been made public. This has certainly also hampered attempts of the opposition – mainly the Flemish nationalists of N-VA, who remain the largest party in parliament – to voice their criticism.

Mr. Elio di Rupo, the 60-year old formateur who is now very likely to become the next prime minister, hopes to finish the last details of the global institutional agreement within a few days. The outlines of the sixth gradual reform of the Belgian institutional architecture since 1970 will then be clear. But then he still has to negotiate all the other subjects. It will surely not take another 500 days, but might need a few weeks.

More rapidly than that Mr. di Rupo will be obliged to negotiate a new budget for 2012. Normally it should be presented to parliament next week and to the European Council on the 17^th of this month. In spring Belgium promised the European authorities that it would target a year-on deficit for all authorities of 2,8 % of gdp next year. That would necessitate at least 7 if not 10 billion euro’s in budget cuts. That is 2 to 3 % of gdp.

Since Belgium has become, with Dexia-bank, the last few days the centre of what seems to be a rapidly growing new banking crisis, it’s spread (between it’s government bonds and the German ones) has been rising the last days, thus raising the cost of servicing the global public debt of the country, still at a level of slightly less than 100 % of gdp. The heaven of  a new government might be coming within reach, but there may still be a lot of blood, sweat and tears in the waiting before Belgium reaches that stage.