An answer to The EU Guide to Broken Belgium
This article in the Wall Street Journal provoked huge interest in Belgium last week, listing as it does numerous reasons why Belgium is failing economically.
Various parts of the Belgian press accused the WSJ of ‘Belgium bashing’, but the criticisms were actually taken from a European Commission report – the so-called Country Specific Recommendations for Belgium. The article had simply ‘interpreted’ the Eurojargon in the report to shed light on some of the weaknesses inherent in this country – the high taxes, grid-locked roads, stagnated labour market and bloated public sector.
Now, as someone who has lived in Belgium for 15 years, I can’t say that I didn’t recognise these criticisms. But (as a seasoned Euro-watcher) what seemed more interesting was the indirect, indeed obtuse way that the criticisms had been made in the Commission report.
The European Commission makes these ‘Country Specific Recommendations’ (CSR) to all 27 Member States at this time every year. The Commission is trying to give supportive advice, rather than making vicious attacks. Like your best friend tactfully telling you to lose a little weight. Not like Gordon Ramsey screaming that you are a useless ****. But the trouble with European Commission documents of course, is that they are often so indirect as to be… well, almost incomprehensible.
For example, the Belgian CSR states,
‘The coordination issues inherent in a highly regionalised structure put emphasis on an efficient organisation of public governance, as the presence of multiple networks, layers and actors may lead to duplication of structures with weakened governance and higher administrative costs.’
This is very indirect. So indirect as to require a translation: Belgium has an inflated, inefficient, ineffective and expensive public sector.
This set me wondering: If all of their criticisms are as opaque as this, maybe the Commission needs some help? Perhaps someone needs to provide simple translations to the Country Specific Recommendations for other countries as well? And perhaps that might make Belgians feel a little better about being targeted by the Commission and the Wall Street Journal?
With this in mind, I turned to another Country Specific Report. Since they are also experiencing a few problems right now, I thought that I’d start with Greece. So here are a few of the Commission recommendations for Greece, with my translations in italics.
1. The consolidation measures taken so far have not been sufficient in attaining the required fiscal effort to correct the excessive deficit.
You may think that you are hurting already, but you need to make more cuts, and raise more taxes, because you are still running the country at a loss.
2. Net lending to the corporate sector remained negative in 2012.
Your banks won’t lend to your businesses because they have no confidence that they’ll get their money back.
3. The fiscal effort envisaged by the authorities is not compatible with an actual correction of the excessive deficit by 2014. Possible additional consolidation measures specified have been temporarily withdrawn and at any rate would not be sufficient.
Your attempts to balance the budget are a joke! You’ve back-tracked on the measures you promised to take, and in any case they weren’t nearly enough in the first place.
4. The labour market reforms proposed by the government aim to increase labour market participation and mobility. The reform is ambitious and relevant to boost labour market participation. However, the reforms are not yet enshrined in law and the time span for implementation seems rather short.
Your labour reforms sound good in theory, but we fell off our chairs laughing at your implausible timetable: let’s face it, the reforms will never take place!
5. VAT administration [should be] reviewed in an effort to increase efficiency, improve tax collection and fight fraud.
There are huge tax loopholes, massive fraud, and your tax authorities are incompetent.
6. There still appear to be governance obstacles to market-driven consolidation in the banking sector, which affect the overall efficiency of the financial sector.
The market knows that your banks are screwed, but you are blocking the necessary changes and pretending everything is ok.
7. Policy action to reduce the high tax wedge for low-wage earners and improve the integration of the long-term unemployed into the labour market has been limited so far.
The working poor pay ridiculously high taxes, and once you’re unemployed for any time you won’t get another job. And you’re doing nothing to solve this.
8. The credibility of fiscal policy over the medium-term would be reinforced by the composition of government expenditure and revenues better reflecting the growth impact of the different spending items and revenue sources.
Your budget is not credible as you haven’t even thought about what impact it will have on the real economy.
Pretty damning, eh? Still, perhaps that’s not unexpected, after all, we are talking about Greece here.
Except… I lied. Whilst all of the quotes above are genuine Commission recommendations, none of them are from the Greek report. 1-2 are addressed to the UK, 3-4 to the Netherlands, and 5-7 to Germany. Oh, and the last one is addressed to the whole of the Eurozone.
Feel better now, Belgium (and Greece)?