BRUSSELS – Belgium agreed to make 1.4 billion euros ($1.8 billion) of savings and to sell 1 billion euros of state-owned assets on Saturday, as it strives to meet EU budget targets and avoid being drawn into the euro zone's debt crisis.
With debt approaching 100 percent of national output (GDP), Belgium has some of the weakest public finances in the euro zone's northern "core", partially due to an almost two-year political stalemate that was only resolved in late 2011.
Its six-party government has taken steps since but, like other euro zone members, looks set to miss the targets set by the European Union due to poor economic growth.
The 1.434 billion euros, an addition to 2013 savings already announced last year, will reduce the country's structural deficit - a measure of the underlying shortfall on public finances allowing for the ebb and flow of the economic cycle - by 1 percentage point, it said.
"The government repeats its wish to bring its budget into structural balance by 2015. This is a new, important step to reach that goal," Prime Minister Elio Di Rupo told a news conference, hours after an early morning breakthrough.
Olli Rehn, EU Commissioner for Economic and Monetary Affairs, gave clearance in the past week for Belgium's deficit this year to be greater than the planned 2.15 percent of gross domestic product (GDP), according to government sources.
But Belgium still needs to reduce its structural deficit, excluding one-offs and smoothing for cyclical factors, to 1.8 percent, keep its overall debt level below 100 percent of GDP and achieve a structural budget balance by 2015.
The additional savings, a huge series of measures ranging from a reduction in support for the national railway operator to an increase in duty on tobacco, would result in an overall budget deficit of 2.46 percent of GDP.
"We have the protected the purchasing power of the citizens and our economic fabric as much as possible," Di Rupo said.
"With these budgetary measures, we will enhance the stabilization of public finances and will reinforce fundamental items necessary to exit the crisis," Di Rupo said.
Finance Minister Koen Geens declined to say what the state might sell, adding that to do so could simply depress prices.
Belgium would need to find a further 1 billion euros from asset sales to ensure national debt did not rise beyond 100 percent of GDP, he said.
Belgium holds a 10 percent stake in French bank BNP Paribas , 53.5 percent of telecom operator Belgacom and a stake in Royal Park Investments, the bad bank created during the 2008 break-up of lender Fortis.
Its headline deficit last year was around the euro zone's recommended ceiling of 3.0 percent of GDP, from 3.7 percent in 2011. However, adding a 2.915 billion euro contribution to the bailout of Franco-Belgian lender Dexia would push the 2012 gap to 3.8 percent.
Belgium did little in the way of budgetary consolidation in 2010 and 2011, due to the absence of a fully fledged government after an inconclusive election. But despite a spike in its borrowing costs at the end of 2011, economists say it now belongs firmly to the safer "core" of the euro zone.
That view was backed up on Monday when the AA-rated sovereign sold 10-year debt at the lowest ever auction yield.
($1 = 0.7788 euros)
(Reporting by Philip Blenkinsop, editing by Ethan Bilby and Patrick Graham)