Country Analysis


The probability for Belgium joining EMU at the start date remains quite high, despite its failure on debt criteria. Belgium’s economic growth has been less than expected due to a large extent to the general poor eonomic conditions within Europe as a whole – particularly involving France and Germany. With GDP growth running at a mere 1.4%, Belgium’s efforts to reduce their Debt/GDP ratio, the largest in EU, has been met with little success. Clearly, with unemployment running at 14%, Belgium’s fiscal tightening through 1997 becomes a social issue of great concern. Still, these policies are likely to allow the fiscal deficit of Belgium to comfortably meet the Maastricht criteria. The question of what happens to this nation once inside EMU will be of great concern in the future. The likely effect of deflation in Belgium being intensified by the strict policies of Germany may leave this nation on questionable social-political ground.

There is little doubt that Belgium’s excessive debt levels will remain a major problem for the future and at least in theory, should alone exclude it from EMU altogether. Nevertheless, Belgium is perceived as a key and vital core part of Europe. For this reason, if EMU is going to exist at all, it must include Belgium along with France and Germany. Consequently, Belgium presents some serious risks to EMU since the criteria for the group must be flexible in order to include Belgium and therefore leave the door open for Italy as well.

Belgium’s political leadership unquestionably remains committed to joining the new single currency. While the current centre-left coalition of Christian Democrats and Socialists was formed after general elections in May 1995, it is widely expected to hold power at least until 1999.


1995 1996e 1997f
ERM Member Y Y Y
Inflation 1.5 2.1 2.0
Budget Deficit / GDP 4.1 3.3 2.8
Debt / GDP 133.7 130.6 127.7
10Y Bond Yields 7.5 6.5 6.1
f=forecast e=estimate


© Princeton Economic Institute

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