The budgets of the various entities of the country are now closed. And one thing is clear, there are debts on all floors of the Belgian house. A debt that even tends to grow in some cases. So should we be worried about seeing the debt swell in this way? How to explain such a situation? And should we expect an impact on our portfolio? To take stock, QR the news received Bernard Candelon, professor of economics at UCLouvain, and Joseph Pagano, professor of economics at Umons.
Is Belgium living beyond its means?
Spending has indeed risen sharply, the deficit has widened and the debt has increased. But we suffered a shock with this health crisis which was unpredictable and of such importance, that it was therefore necessary to act in the same way, comments Bertrand Candelon. “There was a need to support and revive the economy and we can see that the rebound is important. All this in a context where rates are very low. This enabled the public authorities to borrow at low cost. On the other hand, we must realize that before this last crisis, we had not yet settled the accounts of the 2008 crisis. Unlike our Dutch or German neighbors, we had a debt which was still around 100% per year. in relation to the wealth created. So we should have created bigger margins in the past“.
For Joseph Pagano, this level of debt is not really worrying because we borrow at zero interest or sometimes with negative interest. So in the end, the amount of debt doesn’t really matter. However, it is very likely that in the future the rates will rise and that therefore the state will have to pay higher interest.
New taxes in the future?
The fear of new taxes is very real. This is what we experienced after the 2008 crisis, with an austerity policy. But as Bertrand Candelon explains, we realized that this austerity policy has hurt our economy. “This austerity policy reduced activity and therefore had a negative effect on debt. The IMF, the world monetary fund, has also admitted its error. And so I don’t think we will have this tendency to increase taxes after covid. On the other hand, it will be essential that current public spending is efficient and that it creates wealth. It will be necessary to be pragmatic and no longer ideological with the primary goal of generating activity“.
Joseph Pagano wants to be much more careful with taxes. “I cannot guarantee that there will not be any in the future because the changes in our society will perhaps force us to do so. I take two examples: pensions and health care will soon represent nearly 5% of GDP more. The other challenge is the fight for the climate and insulating our buildings will also cost a lot of money “.
Not enough revenue? Unfair revenue?
The citizen is very heavily taxed. Belgium taxes a lot and especially income from work, confirms Joseph Pagano. And it is true that there are totally abnormal situations. These are the famous tax loopholes where you can get money according to the professor of economics at UMons. “There is no reason why a footballer who earns the same as a doctor should be taxed less. There is also a non-taxation of kerosene, the fuel for airplanes. It was supposed to promote international trade. This is not our time any more. There too, there are possibilities of taxation which are obvious. And finally think of all these multinationals which are not taxed in Belgium or elsewhere “.
The state spends badly?
For Bertrand Candelon, it is essential that public spending be efficient and that it be evaluated: “It is absolutely essential that public spending create growth otherwise we will not be able to cope with the repayment of the debt in the long term. For each project, there should be budgetary trajectories and that its impact be analyzed.”
Social and tax fraud?
The federal government’s objective is to bring $ 400 million back to state coffers from fraud. A completely credible objective according to Joseph Pagano, if there is a real political will and especially the means in human terms to achieve it.
Bertrand Candelon adds that there would certainly be a radical way to fight against tax fraud, it is purely and simply to suppress cash.
State too expensive?
Joseph Pagano pleads for a rationalization of certain political structures: “I think we don’t need regions and communities and community commissions. We could rationalize. I should point out that the savings would absolutely not be sufficient to cover the current debts. Nevertheless, it would be more efficient and clearer“.