Among the International Monetary Fund recommendations following the mission to Belgium —
Tackle the imbalances inherent in the current fiscal federalism arrangements. Resolving vertical imbalances will require shifting more of the burden of fiscal consolidation and preparation for population aging from federal/social security to community/regional entities. Horizontal imbalances between communities/regions should be reconsidered with a view to providing a better match between spending authority and revenue-raising responsibility and improving the transparency and incentive effects of intergovernmental solidarity mechanisms.
God knows how long it took to draft such a masterful dodging around Belgium’s regional sensitivities, albeit at the expense of a paragraph that will bewilder anyone who doesn’t know much about Belgium.
So one heads back to earlier IMF reports on Belgium to see what on earth they mean and it seems to be: the big federal government responsibilities, pensions and health, are the ones that are getting steadily more expensive due to demographic changes, and Flanders bears a lot of these costs because the taxes that finance them rely on a tax base in which Flanders has a high weight.Â Hence, says the Fund, the long-term solution requires shifting pensions and health to regional governments so that costs and benefits more closely match.
The political problem with that is what while it reduces Flemish grievance about bearing a disproportionate share, it likewise weakens the burden-sharing inherent in federal mechanisms and lays the groundwork for the regions going out on their own. Â It’s a tricky prescription to be selling when the separation issue is probably back in the play with the resignation of the painstakingly formed government over the Fortis affair.Â Hence the need to bury it in Fundese. Is that a linguistic community in Belgium?