The Return of the Deficit

The Return of the Deficit: Public Finance in Belgium over 2000-2010

Etienne de Callataÿ
Françoise Thys-Clément
Copyright Date: 2012
Published by: Leuven University Press
Pages: 328
https://www.jstor.org/stable/j.ctt9qdxbw
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  • Book Info
    The Return of the Deficit
    Book Description:

    An in-depth analysis of Belgium's public finance in the recent past Prior to the outbreak of the financial crisis in 2008 Belgium's fiscal balances and debt ratios seemed to be on a firm consolidation path. Today, however, Belgium is facing a major budgetary challenge, albeit to some extent lesser than that of other European countries. A proper understanding of the current situation and the design of the most appropriate policy response always benefit from an in-depth analysis of the recent past. This book offers that closer look at the evolution of public finance in Belgium over the decade 2000-2010. The Return of the Deficit presents a collection of original essays written by the best public finance scholars in Belgium. It covers Belgium's macroeconomic environment, its budgetary policy, changes to the tax system and social security, the evolution of public expenditure, debt management, and fiscal federalism. This is the seventh volume in the authoritative series History of Public Finance in Belgium published under the auspices of the Belgian Institute of Public Finance. It is introduced with a foreword by Herman Van Rompuy, President of the European Council.

    eISBN: 978-94-6166-074-9
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. 1-4)
  2. Table of Contents
    (pp. 5-6)
  3. Foreword
    (pp. 7-10)
    Herman Van Rompuy

    In the 1990s, Belgium’s public finances were dominated by rigorous consolidation which reduced the budget deficits of all government entities from more than 8% of GDP in 1992 to virtual balance in 2000. The primary surplus actually exceeded 6% of GDP throughout the 1998-2001 period. This was necessary so that, in the ensuing 15 years or so, the public debt could be reduced to the 60% target under the European Stability and Growth Pact. It must be said that the pressure to join the euro – resulting from the Maastricht Treaty – was a powerful argument for persevering.

    In the...

  4. Introduction BELGIUM ON THE EVE OF THE GREAT SOVEREIGN DEBT CRISIS
    (pp. 11-24)
    Etienne de Callataÿ

    The decade from 2000 to 2010 in Belgium is characterised by a sharp deterioration in the most popular performance indicator in the field of public finance, i.e. the overall fiscal balance, which went from balance to a 4% deficit. But there is no such thing as a key performance indicator (KPI) when it comes to assessing fiscal policy. The quality of the latter, in particular in terms of efficiency, fairness and sustainability, cannot be summarised by a single figure leading to a thumbs up / thumbs down type of conclusion.

    The ultimate objective of the collection of essays presented in...

  5. 1. The European Context EVOLVING GOVERNANCE IN THE EU: FROM THE SGP TO HELL AND BACK?
    (pp. 25-50)
    Guy Quaden, Jan Smets and Geert Langenus

    On 1 January 1999, at the start of the so-called Stage Three of the Economic and Monetary Union, eleven EU Member States took the historic step of introducing a new common currency. The creation of the euro was as much a political decision as an economic one: the adoption of a common currency was considered to be a logical and necessary step in the gradual process towards greater European integration. Meanwhile, the euro has firmly established itself on the world stage, the European Central Bank has successfully kept euro area inflation rates low in accordance with its mandate, and six...

  6. 2. Overview MAIN DEVELOPMENTS IN PUBLIC FINANCE
    (pp. 51-64)
    Maud Nautet and Luc Van Meensel

    The purpose of this chapter is to give a brief overview of the main developments in Belgian public finances during the 2000-2010 period. It does not aim to provide detailed explanations on the subject, but to establish a general context. It is based on the statistics presented in the annex, up to date at the end of June 2012. The other chapters in this publication will go into more detail on the key facts concerning public finances during the period analysed.

    The first section focuses on the budget balance and the public debt. The second describes the main changes concerning...

  7. 3. The Fiscal Stance THE RETURN OF THE PUBLIC BUDGET DEFICIT
    (pp. 65-94)
    Reginald Savage

    The 2000-2010 decade got off to a most auspicious start from a budgetary point of view. The Belgian public budget deficit had almost disappeared at the end of the 90s and the economic outlook was optimistic for the coming years, based on the expected dynamics of the “new economy” technological paradigm. In that context, the medium-term projections by the Federal Planning Bureau (FPB) in 1999 and 2000, under unchanged policy assumptions, forecast the gradual emergence of substantive fiscal surpluses and, as a result, significant fiscal margins for expansionary policies.

    At the beginning of the decade, the fiscal policy framework was...

  8. 4. Tax Revenue and Tax Policy A DECADE OF TAX CUTS
    (pp. 95-120)
    André Decoster, Marcel Gerard and Christian Valenduc

    During the nineties, the tax policy stance was clearly subordinated to the fiscal consolidation strategy of the federal government. “Maastricht” and “3%” were the key word and figure that dominated the decennia (Decoster, Gérard and Valenduc, 2001). On the revenue side, two main reforms contributed to fiscal consolidation: the automatic indexation of personal income tax was suspended, apart for the zero rate bands and the related family tax credits, and a crisis surcharge was introduced for personal income taxes (PIT in the rest of this chapter) and corporate income taxes (CIT in the rest of this chapter). On the CIT...

  9. 5. Approaches to Primary Expenditures
    (pp. 121-172)
    Valérie Schmitz, Bastien Scorneau, Robert Deschamps, Stefan Van Parys, Luc Van Meensel, Koen Verhoest, Martijn van den Hurk, Steven van Garsse and Jean Hindriks

    In this chapter different authors shed light on a particular aspect of government expenditure or public governance in general. In one way or another, they all address the theme of government efficiency. The contribution by Valérie Schmitz, Bastien Scorneau and Robert Deschamps focuses on the spending differences between regions. Why does a higher share of the budget not always imply a better output? Stefan Van Parys and Luc Van Meensel describe the evolution of employment in the public sector in both a narrow and a broad sense. The Belgian story is also compared with those of other European countries. A...

  10. 6. Social Security THE ACTIVE WELFARE STATE: A STYLISED RETROSPECTIVE
    (pp. 173-214)
    Frank Vandenbroucke and Kim Lievens

    Since the mid-1990s, a vast literature has been published on the need for a ‘new welfare state’, in which three core ideas resonate: new social risks, social investment, and the development of services. Unemployment, old age, ill health, sickness and disability, and the financial burden of raising children were seen as constituting the ‘old’ risks, which had been increasingly catered for by welfare states since the Second World War. In the category of new social risks one might list the following (Bonoli, 2006): (i) the impossibility of reconciling family responsibility and paid labour; (ii) single parenthood; (iii) long-term care dependency...

  11. 7. Indebtedness INTEREST PAYMENT AND PUBLIC DEBT
    (pp. 215-240)
    Natacha Gilson and Jean Deboutte

    Belgium’s public debt steadily fell from 1993 to 2007. Unfortunately, the financial crisis erupted and led to an increase in the debt-to-GDP ratio from 2008. Nowadays, both academic literature and public debt managers pay attention not only to the public debt level but also to its composition. Actually, a large strand of literature has been devoted to the public debt structure. Nevertheless, as these theoretical models cannot easily be implemented, modern Debt Agencies are mainly based on operational goals aiming at minimising the financing cost of the debt within the framework of appropriate risk management. Moreover, recent trends in the...

  12. 8. Fiscal Federalism THE TRANSITION TO A NEW MODEL OF FISCAL RELATIONS
    (pp. 241-290)
    Koen Algoed and Frédérique Denil

    Federalism in Belgium is an evolving process towards growing decentralisation of responsibilities and revenue. For more than 40 years, various institutional reforms have played an essential role in designing revenue and responsibilities of the Regions and the Communities. The last decade has seen the implementation of the Lambermont agreement and the adoption of the Sixth Reform of the State. While the Lambermont agreement has mainly affected the pattern of funding mechanisms of the sub-national entities, the Sixth Reform of the State seems to organise a major step in the decentralisation of responsibilities as well as their financing. In this way,...

  13. Conclusion
    (pp. 291-296)
    Françoise Thys-Clément

    One of I.B.F.P’s (Belgian Institute of Public Finance) main missions is to provide precise analyses of the evolution of public finances. It is on this basis that, since after WWII, it has regularly published books on the decennial evolution of budgetary and fiscal policies. We must thank Etienne de Callataÿ to have conducted this monograph, as he had ten years ago, that describes the evolution of public finances from 2000 to 2010. The title clearly emphasizes the difficulties regarding the efforts carried out during the previous 20 years to bring the Belgian economy back on track. The book also presents...

  14. Annex 1: PRESENTATION OF THE BELGIAN INSTITUTE OF PUBLIC FINANCE
    (pp. 297-302)
    Aloïs Van de Voorde
  15. Annex 2: STATISTICAL OVERVIEW
    (pp. 303-326)
    Maud Nautet and Luc Van Meensel
  16. Annex 3: LIST OF CONTRIBUTORS
    (pp. 327-328)