Belgium will feel the legacy of Wolfgang Schäuble in the coming years

Former German Finance minister Wolfgang Schäuble, best known for his very strong position during the financial crisis a decade ago, died on Tuesday at the age of 81. His death coincides with the revival of strict EU controls on national budgets. In Belgium this revival will determine what politicians will be able to do, and will have to do, in the coming years.

Internationally, Schäuble best known for his terms as Germany's Finance minister, from 2009 to 2017. It was a time when commercial banks were in deep trouble, pushing several EU member states into even deeper trouble. Greece came very close to bankruptcy, which led to many hard discussions inside the euro framework. Schäuble was the leader of the hardliners who were pushing for major budget cuts and strong socio-economic reforms.

Schäuble and his followers received a lot of criticism but were able to push through most of their demands. Today, Greece is in a much better position, after years of strong moderation.

Crisis

After Schäuble left the international financial world, the Covid pandemic broke out. This led to a victory for advocates for less strict control on the budgets of EU member states. During the pandemic and the following energy crisis, after Russia invaded Ukraine, eurozone countries invested a lot of public money into their economy. The euro rules about a maximum budget deficit of 3 per cent of GDP and a maximum sovereign debt of 60 per cent of GDP were violated massively.

Today, the EU institutions are nearly ready with a new system that will oblige euro countries to limit deficit and debt. Finance ministers agreed last week on a compromise from France and Germany, the flag bearers of the two opposing groups.

Derailed

For Belgium, this will have major effects from 2025. Due to the country's complex institutional structure, the budget has been completely derailed and meaningful structural reforms are lacking. Pressure from EU institutions in the coming years could lead to a breakthrough.

In 2024, Belgium will have a deficit of 4.9 per cent and a total debt of 106 per cent. According to the new rules, this should be remediated in four years. Three additional years can be granted if enough reforms are pushed through.

The big question is an internal one: how will this huge effort be divided among the federal and regional governments? The federal government has the biggest debt, but the smallest income. The situation in each of the regions differs a lot, and no government is willing to give the others any presents.

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