Home > Business News > Belgium freezes spending to cut gap

Belgium freezes spending to cut gap

Central bank sees ‘very anemic growth’ at best.

Brussels: Belgium froze €1.3 billion (Dh6.16 billion) in spending after the European Union warned that a weaker-than-projected economy would push the deficit above the new government’s targets.

“It’s a purely administrative suspension to give us time to conduct the budget review,” Budget Minister Olivier Chastel told L’Echo newspaper. He defended the government’s budget math, saying it will squeeze the deficit down to 2.8 per cent of gross domestic product in 2012 as planned.

The EU’s prediction of a higher deficit weighed on Belgian bonds on Friday, pushing the extra yield over German debt up by six basis points to 278 basis points. Belgium, saddled with Europe’s fifth-highest debt, is battling to prevent a surge in borrowing costs amid domestic hardships and scepticism about the euro area’s response to the debt crisis.

Belgium’s first-half economic prospects range from “very anaemic growth” at best to a contraction of 0.5 per cent at worst, said Luc Coene, head of the Belgian central bank.

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