Belgium extends austerity plans to meet EU’s budget restrictions

BELGIUM will extend austerity measures by €1.82bn (£1.5bn) because of a possible contraction of its economy this year, to keep its 2012 budget deficit within EU limits.

After a full week of talks, ministers from the six-party coalition agreed a series of measures yesterday as well as the freezing of a further €650m of spending, in case further economic weakness meant more savings were required.

Belgium will raise tax on tobacco and investment products. It will save by postponing delivery of army helicopters, promoting generic medicines and giving less aid.

One-offs, notably the €289.6m of state subsidies that postal services operator Bpost must return, will also help.

The new savings add to the €11.3bn package of measures agreed when the government took power at the end of the year. Those measures included raising the effective retirement age from a current average of 59 and hiking tax on company cars.

Belgium has pledged to bring its public sector deficit down to 2.8 per cent of gross domestic product (GDP) this year from 3.8 per cent in 2011. It risks an EU fine if its deficit does not fall to at least three per cent.