Belgium fell in behind model eurozone pupils Italy and Greece yesterday, its feuding politicians ending 19 months of deadlock with an 11th-hour budget deal that met EU strictures hours after a brutal downgrade.
Latest data suggest that 2012 could unleash a significant recession despite milder predictions
“There is an agreement,” French-speaking Socialist premier-to-be Elio Di Rupo’s spokeswoman Ermeline Gosselin told AFP on the stroke of noon, as exhausted but elated politicians closed more than 500 days of struggling to craft a workable government.
The budget, crucially, will see Belgium’s public deficit fall to 2.8 per cent of gross domestic product (GDP) in 2012 if respected – enough to avoid the ignominy, as soon as next month, of punishment leading to a possible hefty fine from the EU’s new ‘euro’ commissioner Olli Rehn.
In the end, though, it was a lashing from one of the world’s top three credit rating agencies – Standard and Poor’s – that led squabbling Flemish and French-speaking parties to bury the hatchet and find a middle ground that could accommodate spending cuts, tax increases and a radical overhaul of social choices.
A palace statement said that King Albert II of the Belgians “is delighted that an agreement has been reached. As a result, he invites (Di Rupo) to finalise a government as quickly as possible.” Negotiators for the six parties involved said the deal “meets Belgium’s commitments to the EU.”
If all goes to plan, and sources said all the parties factored in the latest data suggesting that 2012 could unleash a significant recession despite milder predictions, then the Belgian state would return to having a balanced budget in 2015. But in order to get there, Belgium has had to agree to “long-term structural reforms” of the sort imposed on Greece, Italy and other euro countries, meaning early-retirement options will disappear in a generational change over the coming years.
The deal will “sail through” the EU test, said Flemish liberal Alexander De Croo, whose decision to pull the rug from under the last fixed government lay at the root of an existential crisis that brought unwelcome global attention, beating war-torn Iraq’s previous record wait to form a government.
De Croo insisted it would also “convince financial markets,” immediately after Friday night’s S and P downgrade, which saw Belgium drop by one notch to AA and led analysts to talk of the eurozone core being potentially weeks from its demise.
Di Rupo will give a press conference this afternoon focused on the way ahead for a Belgium once more projecting a unified image.
But the parties only reached their goal after they excluded from their negotiations the most powerful grouping in Dutch-speaking Flanders and Belgium’s biggest vote-grabber, Bart De Wever’s separatist N-VA.