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Progressive reduction in the public debt consistent
with the draft European directives
Following a substantial fall of 29.5 % of GDP over
the period 1999-2007, the public debt ratio increased sharply to 96.8 %
in 2010, compared to 84.2 % in 2007, thus halting what had been a
continuous decline since 1993. Apart from the endogenous rise in the
public debt ratio in the context of a fall in gross domestic product and
a significant deterioration in public finances in the wake of the
economic crisis, the increase in the debt is also due to the size of the
exogenous factors determining the movement in the debt in connection
with the interventions in the financial sector, essential to restore the
sector’s stability. The contribution of these factors to the expansion
of the debt comes to 6.3 % of GDP.
In view of the high debt ratio and, hence, the
vulnerability of the Belgian economy to sudden interest rate movements,
the Belgian government aims to stabilise the public debt ratio as
quickly as possible. Taking account of the impact of certain operations
to assist Greece and Ireland under the European support system, it is
important to reduce the endogenous debt ratio first, and then to start
reducing the overall public debt ratio.
In the coming years, and taking account of the
assumptions made, the endogenous debt ratio should stabilise in 2011,
taking account of a minimum target for the deficit of -3.6 % of GDP.
However, the overall debt is expected to continue rising, owing to the
2nd tranche of the loan to Greece of € 1.28 billion (or 0.35 % of GDP),
in accordance with the commitments given by Belgium under the support
mechanism for that country, and owing to the aid to Ireland amounting to
€ 607 million, or 0.16 % of GDP.
By 2012, the general government debt ratio,
according to the EDP definition, should begin to fall, given that the
level of the effective primary balance is higher than the primary
balance required to stabilise the public debt. In 2015, the public debt
should thus subside below the 90 % mark to approach the level recorded
in 2007, with a debt ratio of 88.4 %(1).
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TABLE 18
Debt ratio |
|
% of GDP |
2010 |
2011 |
2012 |
2013 |
2014 |
|
1. Gross debt |
96,8 |
97,5 |
96,5 |
95,1 |
92,2 |
|
2. Change in gross debt ratio |
0,6 |
0,7 |
-1,0 |
-1,4 |
-2,9 |
| |
Contributions to changes in gross debt |
|
3. Primary balance |
-0,7 |
0,1 |
0,7 |
1,8 |
2,9 |
|
4. Interest expenditure
|
3,4 |
3,5 |
3,6 |
3,7 |
3,6 |
|
5. Stock-flow adjustment |
0,1 |
0,8 |
0,2 |
0,2 |
0,2 |
|
p.m. implicit interest level |
3,7 |
3,7 |
3,8 |
3,9 |
4,0 |
|
p.m. endogenous debt |
96,7 |
96,7 |
96,3 |
94,9 |
92,0 |
With a decline of 9.1 % in the public debt over
the period 2011-2015, and therefore an annual average fall of 2.3 %,
Belgium is already responding well to the future European requirements
under the preventive element of the Stability and Growth Pact which, in
Belgium’s case, provides for a minimum annual reduction in the debt
equivalent to around 2 % of GDP(2).
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TABLE 19
Primary balance
required to stabilise the endogenous debt ratio |
|
In % of GDP |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Required primary balance |
-0,2 |
-0,3 |
-0,4 |
0,1 |
-0,2 |
|
Target primary balance |
-0,7 |
-0,1 |
0,7 |
1,8 |
2,9 |
It should be noted that this movement in the
public debt is consistent with the objectives previously defined in
terms of the financing balance, and is based on the absence of any
repayment by the financial institutions over the period 2011-2014. In
the light of the commitment made by the Belgian government concerning
the allocation of any reductions in its stake in the financial sector,
repayment by certain financial institutions during the period 2011-2014
would mean a corresponding reduction in the Belgian public debt.
Against the backdrop of the financial crisis, the
Belgian government granted guarantees to the financial sector to ensure
that the sector functioned normally. Unlike capital investments and
loans, those guarantees have no impact on the consolidated gross debt
since they are considered in the national accounts as contingent
liabilities and are recorded off the balance sheet. Those guarantees
totalling € 55.7 billion at the end of 2010, against € 92.4 billion in
2009, constitute a maximum theoretical risk. For 2011, those guarantees
should amount to € 41.2 billion, or 11% of GDP. Up to now, there has
been no need to activate any of the guarantees. In order to control this
risk, the movement in the various underlying assets covered by
guarantees is constantly monitored and checked by the Monitoring
Committee.
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TABLE 20
Actual grant of
guarantees to the financial sector by the federal government |
|
In € billion
|
End of 2010 |
2011 (estimate) |
|
Dexia |
26,9 |
14,0 |
|
FSA |
5,2 |
5,2 |
|
Fortis Bank |
3,9 |
3,9 |
|
RPI |
4,6 |
4,6 |
|
KBC |
15,1 |
13,5 |
|
Total |
55,7 |
41,2 |
|
in % of GDP |
15,9 % |
11,3 % |
(1)
For the time being, the Debt Agency is not planning any interest rate
swaps like those in 2009 and 2010, in view of the fact that the aim of
lengthening the maturity of the debt securities portfolio will be
achieved in the normal way with the programme for the issue of longterm
securities. In the event of persistent inflationary pressure, the
Treasury could neverthless make provision for payers swaps (the Treasury
pays a fixed interest rate and receives a floating rate) in order to
limit the market risk (risk of interest rate adjustments). Mutatis
mutandis, if a recession is looming, it can conclude swaps, as it did in
the first half of 2009. However, those positions have since been
liquidated.
(2)
Minimum reduction of 1/20 of the difference between the public debt and 60 %
of GDP. For Belgium, the figures are therefore (96.8 %-60 %)/20 = 1.8 % of
GDP
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