Belgium Gov’t Agrees on Spending Cuts

Belgium’s coalition government has agreed the basics of its budget, finding savings of some €3 billion ($3.4 billion) to help balance the books.

“Agreement,” said Prime Minister Charles Michel in a tweeted message late Friday after lengthy talks finally produced an accord, AFP reported.

Negotiations appeared blocked earlier in the week, with Michel promising to work “relentlessly” to get a deal by Saturday when European Union member states using the euro currency are supposed to submit their 2017 budgets for scrutiny by Brussels. Spending cuts, especially in health, were a key sticking point along with plans to introduce a controversial capital gains tax broadly opposed by business.

Belgium, unlike most other countries, does not have a capital gains tax and the proposal exposed sharp differences within the coalition government Michel has led since 2014.

Flemish Christian Democrat party head and Deputy Premier Kris Peeters who submitted the plan, said the new tax would not affect small- and medium-sized companies nor start-ups.

Rather, only the “wealthiest 10%” of the country would have to pay it, Peeters said Thursday as he sought to dampen opposition to the tax.

The European Commission forecasts the Belgian economy will grow 1.2% this year, rising to 1.6% in 2017, which would make it one of the better performers in the EU.

The Commission puts the budget deficit—the shortfall between government revenues and spending—at 2.8% of total economic output for 2016, within the EU’s 3% limit.

For 2017, the deficit is expected at 2.3%.

Total debt as a ratio to GDP will come in at 106.4% this year, falling to 105.6% in 2017 but still well above the EU 60% ceiling.