SPEECH MADE " Economic and political evolutions" BY MR. HERMAN VAN ROMPUY

1.         Putting the crisis in context

Over the last nine months, Belgium has been “enjoying” tremendous coverage in the international media and from diplomats.  The most important reason is that my country is the de-facto capital of the European Union, a community of half a billion people, and therefore has the largest concentration of the international press corps.  Belgians still do not fully appreciate how “mediatised” their own domestic politics are.  Furthermore, that international press brings out its information mainly from one particular media angle, where a pronounced fear of separatism, for example, can be clearly discerned, and thus a slanted picture is created of the real situation in the country. What is a political crisis then soon becomes an existential crisis.

People need to understand properly that a bipolar country like Belgium is always subject to tensions, that have actually been there since the country’s creation.  For almost a hundred years, there was a fight to have Dutch recognised as an official language in its own right and to establish the boundaries of the linguistic regions.  Once “pacification” had been achieved on this issue, work started on the process of state reform, to introduce a federal structure to the country.  Between 1970 and 2001, the Constitution or the special laws governing the running of the country were revised five times.  On each occasion, a two-thirds majority and/or an additional simple majority in each linguistic group was required.  Sometimes these relied on the opposition, or rather, sometimes the opposition is prepared to cooperate, but often governments are formed that can muster a two-thirds majority.  This is no mean feat, because they have to reconcile divergent visions and interests of the two main communities.  The same exercise occurs in the EU, where in the last fifteen years, the treaties (equivalent to a constitution) have been revised several times (Treaties of Maastricht, Nice, Amsterdam and Lisbon).

In the past too, these negotiations about State reform were very difficult.  Between 1968 and 1970, there were almost two years of continuous negotiation between the government of the day and between the majority and the opposition.   Between 1977 and 1980, the same thing happened in four governments, including one early election.  From the historic viewpoint, today’s ‘crisis’ is by no means exceptional.  In the postmodern era, even very recent ‘history’ tends to become a blur rather quickly.

2.         The Belgian problem

The persistence of the discussions is caused mainly by the sense of identity in relation to language and cultural, mainly in the areas near the (linguistic) borders, and due to the differences in economic development between North and South.  In the current political crisis, both these problems are involved.  Language problems are social in origin.  French used to be the language of the elite, even in Flanders.  “Frenchification” was a case of sociological pressure.  It has increasingly become a matter of symbolism, but that does not make it any easier to solve.  Symbols in this case are closely related to a sense of identity.  Self-esteem and respect are needs of human nature.

The economic differences result in a different contribution to the budget depending on tax revenues.  The transfers between Flanders and the other two regions (6 billion euro on a GDP of 390 billion nationally and of 200 in Flanders) has become a political issue.  In a bipolar structure of the country, it is very clearly visible who is giving and who is receiving.  Where does responsibility begin and where does solidarity end?  This issue is also familiar in the EU where the contribution to the European budget is concerned (see ‘juste retour’ or ‘I want my money back’).  In this way, it is easy for Flanders to demand more powers, since it knows that it has the money to pay for them.  If Wallonia had the same financial resources, it would probably be less keen to talk about ‘solidarity’!

Public life is not only governed by principles, but far more by interests.  That is true in foreign policy, but just as much so in domestic policy!

The best way to allow the debate about further federalisation to take place smoothly is to eliminate the above-mentioned economic differences.  Therefore, it is necessary to speed up economic growth in Wallonia.  At the beginning of this century, a modest catching-up operation was initiated, but the question of whether this will continue over the next few years.  Projections have cast doubt on that.  The Walloon regional authorities are using the currently-available instruments to bring about stronger GDP growth.  The Flemish propose to transfer additional instruments to the regions, particularly in relation to the labour market and fiscal incentives to businesses to take account of the specific situations of the three regions of the country.  So the employment level in Flanders in 2007 is almost 66 per cent (above the EU average), but only 56.7 per cent in Wallonia and 54.6 per cent in Brussels.  Unemployment in the North is 4.5 per cent, 10.6 per cent in Wallonia, and in Brussels even 17.5 per cent.  Among non-EU citizens, unemployment through the country is even 30 per cent (so 22 per cent even in Flanders).  The problem is that more specific instruments for the regions are not allowed to lead to lower labour mobility, which is currently very limited between Flanders and Wallonia, despite the labour shortage on the Flemish labour market.  Between Flanders and Brussels, that mobility is even lower, due among other things to a lack of language skills.  Every day, 360,000 people commute to Brussels from the rest of the country, but Brussels itself has 94,000 unemployed job-seekers, while the surrounding area of Halle-Vilvoorde has more than full employment!

Stronger economic growth in the South and a sustained tempo in the North of the country are also making a strong contribution to financing the additional spending due to the growing ageing of the population and the fall in the working population.  The additional cost of pensions and health care will rise between today and 2050 by about 8 percentage points of GDP.  Taking account of the fall in spending on child benefit and unemployment, the net increase in the cost of the ageing population is estimated at 6.2 per cent.  The fall in the working population will be greater in Flanders than in the other regions.

If more federalism can contribute to higher economic growth and to coping better with the cost of an ageing population, that will be a contribution to greater prosperity!

3.         A long way from separatism

All public spending by the regions and communities adds up to approximately 11.5 per cent of GDP.  Spending by the federal government (which also manages the whole social security budget) is about 30 per cent (including 19 per cent of social security benefits).  Local authority spending accounts for about 7 per cent of GDP.  The key area, also in financial terms, is still the federal government.  The first round of transfers of powers that was decided recently are mainly qualitative.  So we are a long way from separatism.  Even if child benefit and unemployment benefit were completely federalised, this would relate to 3.5 per cent of GDP.  Once again, we are a long way from separatism!

The fear of separatism is also created by the electoral results of separatist parties.  They form about one-third of the Flemish electorate.  There is also a difference between voting for a party that is not only anti-immigration but also separatist, and those which are separatists.  A large proportion of the extreme right electorate is not in favour of Flemish independence.  Furthermore, they lost one-fifth of their voters between 2004 and 2007!  Another separatist party was involved in the negotiations for the formation of a federal Belgian government and is “reformist”.  In the summer of 2007, it signed up to a “90 point” programme which did not even mention regionalisation of health care any more.  Regionalisation of pensions had never been part of the plan to start with: in total these two items account for 16 per cent of GDP.

When the French Communist Party was at the height of its powers, it had 5 million voters or almost a quarter of the French electorate.  But there were never 5 million Communists in France and it was never a Communist country!

4.         The near future

Why are the current negotiations proving so difficult, although they are not more difficult than at other times in the recent past?

-          because every further step to an already mature federalism brings us closer to the social security system.  The unequal economic development of the regions puts the financing of social security outside Flanders into difficulties.  That is why it is even more important to put the emphasis on more economic federalism, precisely to avoid this trapdoor;

-          because a lengthy political crisis is not perceived as that dramatic due to the absence of a monetary signal.  The euro has never been so strong, while in the days of the Belgian franc, internal political difficulties would have led to turmoil on the foreign exchanges;

-          the advent of a new generation of politicians who are not yet used to federal negotiations.  Therefore, the stalemate can only be broken by “pointing the finger” at the other generation!  However, this is just a temporary situation.  In the meantime, “on-the-job training” is taking place;

-          the overall political context in Western Europe and even the USA has changed.  A population that is uncertain as a result of a number of factors (globalisation, loss of ideological and family reference frameworks, information overload) is much more susceptible to radicalisation.  This state of mind is also spreading into the political world.  In the United States, the unwillingness to compromise between the two large parties over the last twenty years has even been called the “second civil war”.  The excessively rapid succession of federal and regional elections fosters a climate of electoralism and polarisation.  The pace is unsustainable: 2003, 2004, 2007, 2009 and 2011, with local elections squeezed in between in 2006 and 2012.

By summer of 2008, a second round of transfers of powers will be agreed.  That has been agreed between the majority and opposition parties, who jointly account for 85 per cent of members of the House of Representatives!  This is a classic way of tackling Belgian problems.  The negotiation is not easy, but then it never has been.  It is also important that agreements were reached again ten days ago.

We are living through a political crisis, but not an existential crisis.