Transcript Belgium and the crisis: Socio-economic impact and policy

The crisis in Belgium:
Socio-economic impact and
policy measures
Bérengère Dupuis
Vilnius, 9 May 2009
A severe contraction of growth
• Relatively sustained growth in the course of 2008
• Brutal slow down in the last quarter: -1.7% of
GDP compared to the previous quarter
• Estimated growth in 2008: 1.2% of GDP (BFP)
Compared to historical trend: 2.3% on average
• Forecast (BFP, May 2009):
2009: -3.8%
2010: 0.0% (progressive recovery)
2011-2014: 2.3% a year on average
BUT: great uncertainty
A severe distabilization of the
banking system
• Belgium: first country in Europe to be hit by the
international banking crisis (September 2008)
• Big Belgian or Belgo- banks with solvability
problems: Fortis, Dexia, KBC, Ethias
• Usual State interventions: recapitalisation, State
guarantee for interbank lending, deposit guarantee
raised.
• More problems ahead: new intervention of the
State in May to rescue KBC (State guarantee)
A severe distabilization of the
banking system
• New governement intervention planned to
stabilize the banking system (isolate toxic assets)
• Problems faced by a small country as Belgium:
big banks bigger than the economy
- banks too big to fail and too big to be rescued
- big banks operate at a European level
 Idea of a European emergency fund financed
anticipatively by banks for recapitalisation, loan
guarantees… in case of crisis.
First assessment on employment:
signs of severe deterioration
• Slow down of job creation in 2008 : +22,300 jobs
(Q1), +13,500 (Q3), +2,000 (Q4)
• First before firing: non-renewal of interim
contracts (-11% by the end of 2008), fixed-term
contracts
• Temporary unemployment for blue collars
(+93,000 in April 2009 compared to April 2008)
 impact on employment cushioned
First assessment on employment:
signs of severe deterioration
• Unemployed workers: +54,240 May 2009
/May2008
• Slow increase end of 2008 (after 1 year of
continuous decrease)
• Flanders hit more severely: +35,000 in May
2009/May2008 (sensitivity to business cycle <
share of industry in the economic structure)
• First workers hit: men, young people, low or
medium qualified, Belgians but + foreigners.
First assessment on employment:
signs of severe deterioration
• First sectors hit: automotive industry, metal
industry (Arcelor-Mittal mainly), banking sector
(restructurations announced)
 job destruction, decrease in production,
subcontractors affected.
• Restructurations announced in the media: 13,706
jobs concerned up to May 2009. Automotive
industry (2,913 threatened jobs), other industries
(4,466 threatened jobs), financial sector (1,389
threatened jobs)
Forecast 2009-2014 (BFP):
strong increase in unemployment
In terms of unemployment, the worse is yet to come:
• 2009: impact on unemployment cushioned by the
important decrease in average hours worked,
« only » 37,000 jobs lost.
• 2010: main impact (lag), 53,000 jobs lost.
• From 2012 only: back to relatively high levels of
job creation (about 43,000 on average/year).
Forecast 2009-2014 (BFP):
strong increase in unemployment
• Only very slow decrease in unemployment despite
recovery in job creation:
- increase in working population: +185.000
(mainly immigration)
- higher activity rate for women
• Forecasted evolution:
- 2009: +78,000 unemployed people
- 2010: +94,000 unemployed people
- 2011:+22,000 unemployed people (more
moderate increase)
Forecast 2009-2014 (BFP):
strong increase in unemployment
• Global unemployment rate:
2009: 11.8%
2011: 15.2% (record post-WWII level)
2014: 14.5% (slow decrease starting off)
Emphasizes the need to set the priority on
employment issues:
• Employment/labour market policies in Belgium
• Additional, coordinated answer at the European
level with a focus on job preservation and support
to workers.
Recovery plans: government and
social partners
• First recovery plan in December 2008: 0.4% GDP
(1.3 billion euros)
• Participation of trade unions: several recovery
measures negotiated by social partners in the
framework of the interprofessional agreement
2009-2010 (thus financed by the government)
• Lobbying from the trade unions (and employers),
on several policy measures, partly successful
First recovery plan
(December 2008)
Measures for workers: focus on purchasing power
and maintaining workers in employment:
• IPA: lump-sum increase in wages (max. 375 euros
over 2 years: meal tickets, eco-tickets) against
decrease in wage costs financed by the
government (% income tax kept by the firms)
• Automatic indexation of wages to inflation
preserved despite great pressures after high
inflation in 2008.
• IPA: indexation of social security benefits
(pensions, unemployment benefits…)
First recovery plan
(December 2008)
• Temporary unemployment improved: higher rates
of wage preservation (from 60% to 70%), higher
wage ceiling. Measure asked by the trade unions.
• Access to the system of temporary unemployment
for workers under interim and fixed-term contracts
• In case of collective firing: access to
(constructive) active labour market policies to
workers under 45 y.o.
• 30 euros reduction on the electricity bill of
households.
Recovery Plan “bis”
(April 2009)
• Beginning 2009: discussions on a possible
extension of temporary unemployment to
employees (asked by the employers)
• Issue left to the social partners, but negotiations
failed (fear of the trade-union: cost of the measure
in case of exagerated use by employers).
• Government leads the discussion but lobbying
from the trade unions to make their voice heard,
result acceptable.
Recovery Plan “bis”
(April 2009)
• Government presents three « crisis
measures »: temporary (1 July - 31
December 2009) with possible extension in
2010.
• Again, objective = avoid as much as
possible the firing of workers because of the
crisis.
Recovery Plan “bis”
(April 2009)
• Temporary reduction of working hours in a firm
by 20 to 25% with reduction in social security
contributions (private/public, blue collars/
employees)
• Voluntary, temporary switch from full-time to
part-time (private firms hit by the crisis, blue
collars/employees)
• Work contract totally or partially suspended
because of insufficiant amount of work, for
employees only (not temporary unemployment but
similar measure)
The cost of the crisis
• Cost of the crisis: recovery plans, rescue plans for
banks, automatic stabilizers (loss of revenues from
taxes and increase in unemployment benefits)
• IMF forecast (April 2009):
Public deficit: 2009: -4.5%
2010: -6.1%
Public debt:
2009: 95.7% (7% banks rescue)
2010: 100.9%
PLUS still in sight: population ageing.
Question: who is going to pay?
• The workers? Twice: (1) job and wage losses, (2)
tax increases and/or reduced State spending on
public services.
• The banks? Contribution after the system is
stabilized? Idea for future crisis: European
emergency fund
• Increased tax revenues: fiscal fraud /evasion,
increased tax on savings income, green taxation…
Important: use of public money under conditionality
and state control.
Rate of trade union membership
in Belgium
• Active population : 51%
• Non active population : 87%
• Total population: 65%
Stable evolution (51-53% of active population
since 1980, slow decrease but not in number)
• 3 trade unions :
CSC (catholic): 1.700.000 workers
FGTB (socialist): 1.200.000 workers
CGSLB (liberal): 150.000 workers