Dexia, the Belgian-French bank that is now on the verge of collapse, is not just any bank. In fact, it is the purveyor of capital to the Belgian authorities. The Belgian announcement to support Dexia is therefore an empty promise. Belgium itself is, it increasingly seems, ripe for demolition.
Belgium is getting deeper into financial swamp
While the news agency media are crying out about euro sinners in Greece and Italy, the situation among Belgians is at least as dire. To begin with: an enormous national debt of around one hundred percent. To this must be added the twenty billion euros that will demand Dexia's bailout and increase the government debt by another ten percent. And unlike the Greeks and Italians, who are now facing tough cuts, there does not seem to be a real sense of urgency among Belgians. There is a sense of urgency in the financial markets. The interest on Belgian government bonds is now around five percent. That is not much lower than the interest on Italian or Spanish loans.
Belgium is fortunate that the 'European capital' Brussels is located within the national borders. A significant portion of the generous emoluments received by MEPs and the army of overpaid European civil servants, around five billion euros a year, are used up in luxury establishments in Brussels and the surrounding area. Also, the extensive entourage at the European court of feathered people, pardon, lobbyists and embassy staff of the many European missions brings in the necessary euros. After all, to be able to influence the lucrative European subsidy flows and comprehensive European regulations, you have to be close to the fire.
Belgian tax burden almost highest in Europe
Belgium can therefore afford a fiscal policy that at most Sweden dares to afford. Belgian taxes are among the highest in Europe. Companies are nevertheless drawn to Brussels because of the presence of the EU. The taxes are used to sustain loss-making state-owned companies and a very extensive social system. For example, unemployment benefits in Belgium last until retirement. Not that it is very easy to become unemployed in Belgium. There is truly unprecedented protection for workers with militant unions who are eager to paralyze an entire industry in order to block an unwelcome wage deal.
What further contributes to the misery are the imbalances between Flanders and Wallonia. Sixty percent of the population lives in the prosperous, fertile lowlands of Flanders, most of whom cough up the unemployment benefits of the twenty percent unemployed Wallonians. Many Wallonians have an old-fashioned socialist mentality based on natural rights, which must be fought and defended with fire and sword.
Three scenarios are conceivable. In the first scenario, 'Europe' grows into a superstate, in which the civil service corps in Brussels grows considerably and the EU also levies federal taxes. This is, of course, the dream scenario for Belgium, because this is how Brussels grows into the largest honey jar in Europe and the tax revenues become so great that a sensible cabinet can even pay off the debt despite the tyrannical champions of the status quo.
In the second scenario, the euro zone is divided into a Northern European and a Southern European part. It is important here where the boundary is drawn. If France joins the Northern European bloc, it will remain business as usual for Belgium, although the high refinancing rate will force the country to put things in order. This will of course produce Greek scenes. If the Northern European bloc does not contain France (for example, because Germany unilaterally leaves the Eurozone), then Belgium will probably not be welcome at the Northern European party given the poor state of the economy. As a member of the southern eurozone, Belgium will have an increasingly cheaper currency. The Belgian business community will then have a break, until the wage demands of the trade unions have made Belgian products and services unaffordable again.
In the third scenario, Flanders declares its independence unilaterally. With this, the Flemish would be released from the lead burden of Wallonia. Close cooperation with the Netherlands is then obvious.