Johan Van Overtveldt on the budget: “If we don’t stop the interest snowball, we risk ending up in a Greek-style crisis”

Speaking on De Zevende Dag, MEP and former Finance Minister Johan Van Overtveldt discussed the rising interest burden and the urgent need to put Belgium’s public finances back on track. His conclusion was unequivocal: “The plan to find €10 billion in savings is absolutely essential.”

The danger of an interest snowball

International tensions in Ukraine and the Middle East, combined with volatility in financial and oil markets, inevitably have an impact on a small, open economy like Belgium. Johan Van Overtveldt points out that Belgium’s ten-year bond yield recently rose above 4%, its highest level in years. “When interest costs exceed the combined effect of economic growth and Inflation The increase in the general price level. The original meaning (literally “to blow up”) is monetary inflation, which means that the amount of money increases. Today, inflation primarily refers to price inflation. This means an implicit monetary depreciation. This causes the purchasing power to drop. inflation , you get an interest snowball effect,” he explains.

Once that snowball starts rolling, interest costs become so burdensome that government debt continues to rise even with a balanced budget. Swift and decisive action is needed to prevent the situation from spiralling out of control. “We must avoid sliding into a debt crisis and losing the confidence of the financial markets,” Johan Van Overtveldt warns. “If we don’t stop that interest snowball, we risk ending up in a Greek- or Argentine-style crisis.”

Protecting Competitiveness The extent to which companies in one country can compete with similar companies in another country. A law came into force in Belgium in 1996 to monitor competitiveness. This stipulates that Belgian salaries may not evolve faster than the average of those in the three neighbouring countries. The Central Economic Council (CEC) performs an annual measurement to see if the objectives have been obtained. competitiveness

In the debate on spending cuts, Johan Van Overtveldt warns against indiscriminate cuts to business support schemes. Around two-thirds of these funds are used to reduce labour costs, including for shift work and overtime.

“If you cut these measures, labour costs will soar, putting a number of our companies in serious difficulty. Even more worrying is that, over time, it will encourage businesses to invest increasingly in replacing labour,” Johan Van Overtveldt explains.

He also rejects proposals to scale back the tax regime for company cars. “That would seriously undermine trust between citizens and politicians. The N-VA is certainly not calling for such a measure.”

Reforming to deliver real economic growth

Alongside cuts in public spending and efforts to contain rising costs in areas such as healthcare, Johan Van Overtveldt believes the sustainable solution lies in boosting economic growth. “We need to free entrepreneurs from absurd obligations that all too often stifle economic initiative.”

At the same time, he opposes any additional taxes on capital or the introduction of a Wealth tax A direct tax levied on capital, regardless of the profits that you gain from it. While capital in the past mainly concerned real estate, it is primarily made up of shares and bonds today. The disadvantage of such a tax is the mobility of capital, which leads to tax tourism. Additionally, these profits will have already been taxed. This is the reason why cost-benefit analyses of wealth tax are often contested, by the N-VA as well. wealth tax . “We must not frighten the people who drive our economy with additional taxes on capital, which are already among the highest in Europe in Belgium,” Johan Van Overtveldt concludes.