Belgian Affairs

A good diagnosis but no treatment

 

A hundred days passed since Herman Van Rompuy became president of the EU-council and Yves Leterme for the second time became Belgian prime minister. It has been a very silent hundred days. A month ago, we wrote in this blog about the uncanny quiet month of January. Things have not changed in February and March.

Surprisingly it is not so difficult to see what needs to happen. The last weeks plenty of academics, politicians and officials published opinions in which they make a sharp analysis of what has gone wrong and what needs to be done. Some of the authors were former Flemish minister of Work and Education and former president of the Flemish Socialist party Frank Vandenbroucke; economist Geert Noels; economist Paul De Grauwe; Caroline Ven, the economic advisor of prime minister Leterme, Alexander De Croo, president of Open VLD, the liberal party that is part of the federal coalition, and Bea Cantillon, a christian-democrat professor on social security.

The essential message these people give is the same: this is no longer an era in which business as usual will do. Belgium needs to restore its competitiveness, has to make preparations to keep its social security affordable, has to get more people back to work en make them work longer and has to scale down government debt.

As easy it is to find someone who makes the right diagnosis, so difficult it is to find someone to start the treatment. Hardly anything is moving. The minister of pensions, the French speaking socialist Michel Daerden, has done a careful suggestion to maybe consider working longer, but that is as good as it gets. No real decisions are expected till the elections of 2011.

This is not only a Belgian problem, but a European one. As the Greeks have showed us, politicians only start to change things when the external pressure on them is high. This pressure can be the financial markets, who speculate on a government bond default, or it can be the European Union or the IMF.

Belgium knows this all too well. The last major social-economic reform happened in the nineties because Belgium wanted to join the eurozone and had to meet the Maastricht-criteria. When street protests got too loud, politicians could say they had to continue because of 'Maastricht'. Having no such external justification in stock, it seems politicians don't think it is time to start reforming.

So how will the second 100 days prime minister Yves Leterme look like? It is assumed that some decisions will be made in April or may and that will be it. From the first of July till the end of December, Belgium is the president of the EU and will make a priority of that. After that, there is an election campaign to start. A good diagnosis it will be. And nothing else.

Bart Haeck

Shocking: Carrefour finds out that culture matters

Carrefour will close 21 unprofitable Belgian stores by June 30th, cutting 1,672 jobs, and may start talks with closely held Groupe Mestdagh to sell an additional 17 to 20 stores.

Most analysts seem to agree that Carrefour has an image problem in Belgium. The Colruyt supermarket chain competes on low prices while Delhaize promotes lots of choice and a pleasant shopping experience.
Carrefour seems to be hesitating between both models and thus confuses customers.

There is yet another problem, which could teach us something about cultural changes in Belgium. Carrefour is known for its hypermarkets (superstores), and that's maybe not the best choice these days.

When I was a little boy, a long time ago, I remember that my family actually liked shopping during the weekends. While I marveled looking at the toys and media, my dad did the same buying DIY stuff and my mom was in the fashion and household appliances departments (these were the sixties and gender roles were still very much alive).

Nowadays Belgians have other plans during the weekends. Shopping has to be efficient and fast. It's not a family activity. Maybe this is different in France - Carrefour is a French company - but spending part of the weekend in a superstore is not exactly a favorite pastime in Belgium.

So I guess Carrefour made a mistake hesitating between low prices and a luxury image, but also made wrong assumptions about how people want to spend their leisure time. Culture matters, especially in retail.

Roland Legrand

A well hidden treasure

Belgian or Flemish ministers of Foreign Trade tell us they are sometimes a bit flabbergasted by what foreign investors don't know about Belgium. One of these hidden treasures is the system of 'temporary unemployment'. This week, the federal service for employment announced the budget for this temporary unemployment had more than doubled in 2009 to 1.05 billion euro.

What is so unique about the system is this: when production levels in a plant fall below the levels that require full employment of the work force, some employees can get 'temporarily unemployed'. They then receive a benefit from the government and the company doesn't have to pay the wages. Especially in industrial sectors, this is quite an advantage. In the aftermath of the financial crisis, the system has been expanded to office workers.

There are two sides to the story on this one: on the one hand it's an asset to attract foreign investments and an asset to cushion the bumpy ride of an economy in recession. On the other hand it's quite an expensive system if the temporarily unemployed get really unemployed. As it seems that the economy could very well remain sluggish for quite some time, something else is needed: not efforts to keep people in old jobs, but to get them into new jobs.

Bart Haeck

Why Belgium doesn't join the PIGS-club

Somewhere in October the Belgian sovereign debt will cross the line of 100% of GDP. This raises an important question: how vulnerable is the country to the Greek disease? How fat is the chance that hedge funds will not only attack Southern Europa, but Belgium as well?

Well, it seems the odds are good for Belgium. Although employment is low and sovereign debt is high, it takes more than that to join the PIGS-club. Some key-issues:

1. The budget deficit is lower in Belgium than it is in the Eurozone. This has to do with the advantage of a small open economy. A big stimulus is not helpful, because a lot of the impact flows away via international trade. That's why there was no big stimulus. But as a small and open economy, Belgium could surf on the stimulus plans in Germany, France and the UK, its most important trade partners. Sometimes small is beautiful.

2. The Belgian sovereign debt is huge, but isn't foreign. The current account is more or less in balance: families save money and buy government bonds and treasuries. As a result, hedge funds don't have much of a hedge to speculate on the Belgian government bond market.

3. Belgian credibility is still all right on the bond markets. Last week, I was at the World Economic Forum in Davos, and the Greek prime minister George Papandreou gave this message: the biggest deficit in Greece is the credibility deficit, not the budget deficit. The Greek bond drama is about unreliable statistics in the first place. Belgium doesn't have this problem. And if I may remind of what Paul Krugman stated at the end of 2009: Belgium has proved it is a reliable debtor. Even in the midst of the economic crisis in the 70ies and 80ies, it never defaulted.

4. About a quarter of the Belgian government debt needs to be refinanced this year. This seems threatening, but shouldn't at current rates. The federal government now pays an average 4% interest on its debts. When it refinances a bond, it nowadays pays 3.7%. And a lot of the Belgian sovereign debt is short term, with very low intrest rates (lower than 1%).

There is one thing to worry, however. The way to shrink the deficit to 3 percent of GDP in 2012 isn't an easy one. First of all, the government is working towards a deficit of 3.4 percent in 2012. The rest - 0.4 % of GDP - has to come from a better than expected economy, or an extra effort of the federal government in 2012. Mind you: 2011 is a federal election year.

Secondly, the regions have to help lowering the deficit, but from 2012 on Flanders doesn't want to. This is creating tensions between the federal government and the Flemish government. Flanders doesn't want to help the federal government because it thinks it does enough - and because it is following the so called Maddens-doctrine (the strategy not to 'bail out' the federal government if Flanders doesn't get a state reform in return). The federal government says that Flanders is neglecting its responsibilities.

Conclusion:  2012 will be a tricky year, but is still far away. In the meantime, there is no need to join the PIGS-club, which sadly creates the opportunity to play some blame games.

Bart Haeck

Brussels: a sad, sad planet

For those who live in Brussels, the city can turn out to be a sad sad planet. Last week a Kalashnikov-style hold up on an exchange office and the decision of a school to move because its students were mugged too often, heated the debate about insecurity in the capital.

Very soon, a very Belgian thing occurred. While the Dutch speaking (Flemish) press discussed the issue very elaborately and - in my opinion - exaggerated by calling certain streets in Brussels a no-go-zone, there hardly was any debate in the French speaking press. The French speaking socialist mayor of Brussels City even called the hold up - a policeman was shot down with a Kalashnikov - a 'fait divers'.

In my opinion, the insecurity in Brussels is only one part of the story. In fact, there are three parts in the story of the failing government in the Belgian capital:

1. Education: in Brussels one out of four students never finishes high school (in Belgium it is called 'secundair onderwijs'. When you finish it at 18 years old, you start working or you go to university.)

2. Work: in Brussels one out of five is unemployed. There is a strong correlation with the previous mentioned figure. Two of three unemployed in Brussels only finished the school-grades you are supposed to get when you're 16, or has a foreign education that is not formally recognized in Belgium.

3. Crime: crime figures of the federal police show that Brussels is doing worse than the rest of the country, but only when it comes to theft. If one takes a look at figures for violence, rape, murder, etc, they are as high in Brussels as in Belgium. The same goes for vandalism.

So yes, there is an insecurity problem in Brussels. But the education problem is as urgent, as is the unemployment issue.

One of the underlying issues is migration. As a capital, Brussels attracts a lot of immigrants. They often lack the education and language skills for the higher level jobs a European capital has to offer.

A second issue is the horrible institutional framework in Brussels. In fact, there are five levels of government.

Level 1. The laws of the European Union.

Level 2. Federal law on justice, police, home affairs, ...

Level 3a. The government of the Brussels region: economy, international trade, local authorities, urban planning, ... Important to notice is that the Dutch speaking politicians have a protected minority in the regional parliament and the regional government of Brussels.

Level 3b. The French speaking community in Brussels and the Dutch speaking community in Brussels: both of them have authority on education policy in schools and welfare policy in hospitals, officially organizing things in Dutch or French.

Level 3c. The gathered commission of the French speaking community and the Dutch speaking community in Brussels. This commission has authority on bi-lingual cultural organizations. (We don't have many of them, but a few though.)

Level 4. The 'provincial' level. Brussels doesn't belong to a province, but has sort of a provincial governor nonetheless. There are signals that this function - which is not needed - will be abolished.

Level 5. The 19 Brussels communities. The difficult - and again very Belgian thing - is that the 19 mayors are French speaking. So there is some French speaking pressure to delegate power from the regional government (that has a Dutch speaking protected minority in it) to the Brussels communities, where no such protection exists.

How does Brussels cope with its key problem of uneducated immigrants on the job market and its crime? This way. As Pascal Smet, a former Brussels socialist minister said: In Brussels everyone is empowered to do something, but no one really is ever responsible. A sad, sad planet, it sometimes is.

Bart Haeck

This uncanny quiet month of January

It has been some time since we published a new blog post on Belgian politics, but then again, for Belgian politics it has been a very quiet month of January. It seems prime minister Yves Leterme is trying to do the very same trick his predecessor Herman Van Rompuy did: getting popular by remaining silent in turbulent times. In the political language of the day, this is called 'stability'.

In the real economy however, things are moving fast. If 2008 was the year of the financial crisis, and 2009 was the year of the economic crisis, 2010 has started as the year of the social crisis. In the first month of the year Belgium has seen social conflicts in companies as AB Inbev, DHL, HP, Gates, Janssen Pharmaceutica, ArcelorMittal, Volvo Trucks and Picanol. Most of the attention went to the Opel-plant in Antwerp, which mother company General Motors is closing down.

As a result, Flemish unemployment is quickly going up to the highest level in four years. The good news is that with an unemployment rate of 7.5% Flanders is still quite well off. The bad news is that Wallonia, with an unemployment rate that is twice as high, is not well off. And what to say about Brussels, that crossed the 21% last month.

 (Some explanation with the graph: NWWZ means 'niet werkende werkzoekenden, or people not working but looking for a job). 'Vlaams Gewest' means 'Flemish region'. 'absolute aantallen', simply means 'absolute figures'.

 

There has been some reaction. At the end of January, thousands of people - 35,000 according to the unions, 26,800 according to the police - joined a manifestation in a rainy Brussels to ask for jobs and respect. The federations of companies reacted with a petition, signed by 20,000 people, to ask 'space' and respect for business.

Politicians have responded by organizing meetings. In the Flemish Region, where Opel Antwerp is located, minister-president Kris Peeters has organized an industrial summit. In the federal government, unions and business federations are sitting back around the table. They now have one month to agree on an agenda.

The big question is how much longer the federal government can afford this situation. The slow turning of the federal government is making especially the younger generation nervous. Young politicians and MP's of Open VLD, sp.a and Groen! (liberals, socialists and greens) have started a petition and a Facebook-group 'the clock is ticking' to voice their protest. Their message: do something, and do it quick. It may hurt, but doing nothing wil only increase the pain in the end.

Bart Haeck

 

 

 

Things to do in (the first half of) 2010

What will Belgian politics be like in 2010? Well, two well intertwined issues are likely to dominate: state reform and the hole in the budget.

It is expected Belgium will have a budget deficit of 5.1% of GDP in 2010. The European Commission says that the deficit should shrink to 3% of GDP in 2012. This means that the coming months, the Belgian federal government of Yves Leterme has to rewrite the budget planning for the coming years.

The nasty thing is that the federal government is almost out of money and will need to ask the regional governments for some more. Flanders only wants to do this if it gets more power in return, which is the so called Maddens-strategy. In other words: if you want to fix the budget, you'll have to fix a state reform.

And then there is that other nasty thing: the electoral district Brussels-Halle-Vilvoorde. The federal government of Yves Leterme has to find a solution if it doesn't want to jeopardize the organization of the federal elections in 2011. Former prime minister Jean-Luc Dehaene has gotten the task to seek for a way out, but no progress has been seen so far.

And even if a solution for BHV is found, it probably will put the Flemish government of Kris Peeters under a lot of strain. One of the parties in that regional government is the N-VA, a die-hard Flemish nationalist party which can not live with the slightest compensation for the French speaking community when it comes to BHV. So if CD&V in the federal government accepts a compensation, how will that same CD&V in the Flemish government keep the trust of its coalition partner N-VA?

A last thing to watch in 2010 is the bridge in Antwerp that was annulated in a referendum. The plans for the bridge may be gone, but the mobility problem in Antwerp isn't. The Flemish government has to find a solution in the coming months, wich will not be easy given the history of the conflict.

And oh yes, from the first of July till the 31st of December, Belgium takes over as EU-president. Expect politicians to find solutions for the above mentioned problems in the first half of the year, when the spotlights of the world don't shine so bright yet on them.

Bart Haeck

Two sad stories about Brussels, the unloved city

http://www.flickr.com/photos/megzimbeck/ / CC BY 2.0

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Unpleasant news for the Belgian and European capital Brussels: a famous landmark brasserie/restaurant today closes its doors and the local river, the Zenne, got contaminated after water purification was deliberately stopped. Both events are not exactly world shocking but illustrate the problematic position of Brussels: it's a city which is not allowed to be a city, keeping an unhappy couple (the French and Flemish communities) together.

The brasserie/restaurant we talk about here is De Ultieme Hallucinatie.

This family mansion was built in 1850 in neo classical style. In 1904 the owner Cohn-Donnay, instructed Paul Hamesse  (architect 1877 - 1956) to restructure and redecorate his home to a contemporary geometrical Art Nouveau style. The furniture consists mainly of train benches, designed by Henry Vandevelde for the Belgian Railways in 1930.

Deals which changed Belgian media and political history were discussed in this venerable institution. The Rolling Stones, Gari Kasparov and Anatoli Karpov once visited the place.

The Flemish owners, Fred Dericks en Kriz Haepers, turned the historical building into a lively and stylish hang-out, especially for the Brussels' Flemish community. Fred Dericks passed away and Kriz Haepers prefers not to continue the hard work of running De Ultieme Hallucinatie. The brasserie/restaurant came on the market for three million euro but potential investors said the place was too big for normal exploitation and too small for big parties.

Observers fear that Brussels will see the decay or destruction of yet another historical art nouveau building. Publicist Geert van Istendael is one of those who cannot understand why the Flemish authorities don't buy the place to turn it into a Flemish House.

The small river the Zenne is considerably less glamorous compared to De Ultieme Hallucinatie.  In the center of Brussels, the Zenne was completely covered up. The Zenne was notorious for being one of Belgium's worst polluted rivers, since all effluents from the Brussels Capital Region were versed in it without treatment.

In March 2007, the completion of new sewage treatment plants, began to remediate this problem. However, last week things went very wrong.

The Brussels North water purification station was shut down. This has resulted in the waste water flushed by 1.1 million citizens of Brussels flowing untreated into the Zenne. The station operator Aquiris had simply ceased treating the water. The company had already halted pumping operations on the river's right bank on 25 November.

The Brussels Water Board and the Brussels Region were immediately informed of that, the water station operator asserts. Almost three weeks passed since the time of the first discharge of untreated water and the reaction of the authorities.

There is a disagreement between the Brussels Region and the Aquiris French parent company, Veolia, on who is to pay for an additional sand filter. The contaminated water will soon reach Antwerp in the Dutch speaking part of the country - contamination does not respect political or language borders. 

In my opinion both stories illustrate once again how undervalued as an asset Brussels is in Belgium. Brussels is a motherless child: It could use more money. It could use more attention from the public opinion in Flanders. Instead of fearing that the capital would expand, they could embrace the most international city on its territory.

Instead public opinion in Flanders avoids the capital, where Dutch speakers are a minority. Those who work in the capital hurry away after work. The few (mostly young people) who'd like to live in the city cannot afford it, the presence of international institutions making it an cosmopolitan but also a relatively expensive place to buy property (and Belgians absolutely want to own property, not rent). 

The French speaking political parties are not doing a great job governing the city. There are tensions between the Walloon region and the capital. The city itself consists out of 19 municipalities. This of often presented as a smart way to govern a city of more than one million inhabitants in a decentralized way.The reality is that it allows local politicians to run their own fiefdoms. 

The only place in Belgium which could be a major international city and which should have the ambition to become another European metropolis such as London or Paris is governed as a small provincial town and its needs are ignored or mistrusted by the two big language communities. 

This, of course, is catastrophic. A country lacking an international metropolis often condemns itself to mediocrity. There is a reason why the young, the talented, the dreamers and the visionaries flock to London, Paris or New York. One cannot create a metropolis by decree (except in China maybe), so some regions simply have the bad luck to stay suburban, dull places. Belgium is lucky enough to have Brussels, the capital of Europe, a cosmopolitan city with a lot of charm. We only should really decide to grasp that opportunity and to enhance it instead of ignoring it.

Roland Legrand

We're all Belgians now

Europe will be the Belgian way or it will not be, the one liner goes. It means that Belgian isn't a state, but a compromise seeking coalition of two states, even a permanent diplomatic meeting. It means that the EU isn't a superstate, but a coalition of many states. Even the Economist says this week 'we're all Belgians now.'

Anyway, in less than two weeks Belgium has captured two big posts in the EU. Former prime minister Herman Van Rompuy became the first president of the EU. And now former minister of foreign affairs Karel De Gucht gets the powerful post of trade commissioner in the European Commission. The EU is a bit more Belgian now than it was last month.

Bart Haeck

Here we go again

Here we go again. This Wednesday, Yves Leterme will be sworn in as the 67th prime minister of Belgium. But not only Yves Leterme is back, in the first place Brussels-Halle-Vilvoorde is back where it once was: in the middle of the political attention.

How did this happen? Well, first of all Herman Van Rompuy became the first president of the EU, leaving his seat as prime minister vacant. His party, CD&V, decided that Yves Leterme should make his comeback. Despite his resignation after the Fortisgate-scandal, he is still the strong man of the party and still has a solid electoral basis in his district, the province West-Vlaanderen.

But with Leterme the demons of the political crisis of 2007 came back. Herman Van Rompuy had finished three out of five of his 'wharfs': the budget, an energy deal with GDF Suez and an agreement on migration policy. The two other wharfs were the biggest: BHV and the state reform.

BHV is a very tricky one, and for those trying to understand Belgian politics it's essential to understand its importance and complexity. It is an issue of territory and language, cultural identity. And because so many promises have been made, it has become an issue of political credibility too. Alas the promises rule each other out. Something gotta give, one day.

A small reminder of the historical context: In the seventies and eighties, Belgium tried to solve its language problems by dividing the country in four areas with a different official language regime: Flanders (Dutch), Wallonia (French), Brussels (Dutch and French) and the small German community near the German border (German).

The whole country - communities, jurisdictions, electoral districts, ... - is divided along these language frontiers. There is one exception: the electoral district (and justice district) Brussels Halle Vilvoorde. For that reason the constitutional court declared the electoral district not in line with the constitution.

In the French speaking part of the country, things are seen in a less legal but more emotional way. Splitting up the electoral district will lead to the break up of the whole country, it is feared. As Flanders is the richer part of Belgium, this would leave Wallonia impoverished.

In this context politicians on both sides of the language borders have done big promises. Yves Leterme promised his Flemish voters to solve the issue in 'five minutes of political courage', a phrase that still is haunting him. And the French speaking politicians only want to split the district if the territory of Brussels can be expanded, which is unacceptable for Flemings. They think Brussels is already to dominant French speaking and often feel it's not their capital but almost a foreign city. What's more, changing the language frontiers - which are fixed in the constitution - is probably more difficult than splitting up an electoral district.

So that's why here we go again. The name of Yves Leterme as the new prime minister was barely whispered last week, or the French speaking politicians started getting nervous again. As a consequence, CD&V had to take everything it got to prepare the comeback of Leterme.

First of all, former prime minister Wilfried Martens started negotiating with the government parties - especially the French speaking ones. The subject of the talks was a bit surreal: the way in wich BHV will be discussed. This shows how the top politicians of the country do not trust each other. The big question was if Yves Leterme could preside the negotiations on BHV or not. If he did, he would make it more difficult maybe, given his track record and his credibility problem due to his 'five minutes of political courage'. But if he didn't, some people feared a replay of the Egmontpact in 1978: the presidents of the political parties negotiated the agreement, but the prime minister, Leo Tindemans, refused to back it, which made him extremely popular with Flemish voters but made a compromise even more difficult.

Former prime minister Martens found a solution in sending another political veteran in the field: former prime minister Jean-Luc Dehaene. He will start searching a solution for BHV. In this way, the issue is evacuated from the government, so Yves Leterme can make his comeback. Politics in Belgium is never a walk in the park.

Bart Haeck