Belgium expands austerity measures to keep deficit within EU limit

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FILE_ Belgium's Prime Minister Elio Di Rupo arrives for an EU summit in Brussels on Monday, Jan. 30, 2012. (AP Photo/Frank Augstein)

The Belgian government has approved Sunday an additional €2.5 billion ($3.3 billion) in austerity measures in 2012 to bring the budget deficit within the European Union limit as economic growth slows.

Ministers agreed to save €1.82 billion and create a budget reserve of €650 million, Premier Elio Di Rupo said in a statement. The additional austerity goes further than the 2 billion euros recommended by the country’s budget-monitoring panel as the government took into account a “possibly worse” economic situation, according to the premier.

“The government wants to protect people and companies against speculation and the worsening of living conditions,” Di Rupo said. “We have also chosen to be cautious.”

The measures will enable Belgium to reach a deficit goal of 2.8 percent of gross domestic product in 2012, below the EU limit of 3 percent, he said.

Belgium’s budget for 2012 was drafted on the assumption that the economy would expand 0.8 percent this year. The monitoring committee, which assumed annual growth of 0.1 percent, recommended earlier this year savings of 1.5 billion euros and a buffer of 500 million euros.

The central bank in mid-February forecast an economic contraction in 2012 of 0.1 percent.

“The difference between plus 0.1 and minus 0.1 percent has an impact of 350 million euros in the fiscal balance,” Di Rupo said, adding that the government took account in its austerity plan of a potentially slower growth rate and deterioration of budget performance.

The planned savings of 1.82 billion euros will include one- time revenue, spending cuts in areas including social security and additional tax revenue, according to Belga. The latter include 61 million euros from increasing the excise tax on tobacco and 37.2 million euros from a higher stock-market tax, the news agency said.