Consolidation of Public Finances in Belgium : An Example of Application of European Norms in a State with a Federal Structure

Bogaert and Père examine the institutional reforms introduced in Belgian public finances over the 1990s. During this period, the process of the federalisation of Belgium, which had been started in the 1970s, moved forward in a context of fiscal consolidation. The regions and the linguistic communities were attributed the responsibility for managing a wider range of public services. The federal government remained responsible for raising most of public revenues, but a larger share was transferred to regions and communities. The Higher Financial Council had an important role in the coordination of the budgetary policies of the different entities. It recommended budgetary balances and primary expenditure targets. The authors note that the federal and social security authorities largely contributed to fiscal consolidation. Finally, Bogaert and Père consider some problematic issues. They note that net public investment has been negative or close to zero in recent years and that most investment projects are the responsibility of regions. At present, regions are recommended to reach structural budget balance. Bogaert and Père note that, if regions were allowed to fund capital projects via borrowing, the federal government would have to achieve a structural surplus to offset the regional deficits. A uniform deficit threshold for all regions would probably be required