Sabena threatens flight from Belgium

AS CHAIRMAN of Sabena, the Belgian state-owned airline, Pierre Godfroid is an unlikely ally of the Westminster Euro- sceptics. Yet he has just thrown a hand grenade into the debate on European social policy.

Frustrated by the huge social security charges that Sabena pays, Mr Godfroid asked his accountants to run a comparison with British Airways. He told them to apply Belgium's onerous social security costs to BA, and the UK's lighter regime to Sabena. The result has astonished Belgium's politicians and the European Union's policy makers in Brussels.

Sabena, which is expected to make a loss of 1.5 billion Belgian francs (£32m) this year, would become a profitable airline overnight if it were based in Britain. And BA's profits of £180m would be wiped out by Belgium's social charges, which are more than twice those paid by British companies of similar size.

Armed with these results, Mr Godfroid went on the rampage. He is now planning to move his 450 pilots from Brussels to Luxembourg, where social charges are lower. In an open letter to the politicians, he wrote that "enough is enough", and explained that the high social charges in Belgium were acting as a brake on job creation.

Belgium's generally complacent politicians greeted his claims with outrage. But Mr Gotfroid had another card up his sleeve. He warned that unless he could in some way reduce Sabena's social costs, the airline's planned link-up with Swiss Air would fall through, leaving the Belgian taxpayer with an even bigger bill to pay in subsidising Sabena.

This is a powerful argument, as no other international airline seems willing to team up with Sabena - where the losses keep on mounting. Three years ago, a planned alliance with BA fell through. Sabena subsequently turned to Air France, but now the French airline wants out - because it cannot see a way to stop the haemorrhage. Swiss Air is the last chance.

In his letter to Philippe Maystadt, the Belgian Minister of Finance, Mr Godfroid says: "This is not blackmail, minister. It is simply the harsh reality of our times, mixed with a little good sense. Make your own calculations."

More alarming for the politicians is the support that Mr Godfroid has received in Belgium for a doctrine that sounds remarkably similar to John Major's.

Other Belgian companies have started to come out of the woodwork, saying that they will start moving jobs and factories out of Belgium unless the social charges are lowered. Belgian banks are already transferring their higher-paid staff to Luxembourg, and other companies are threatening to follow suit.

It is not difficult to see why. The Belgian Federation of Enterprise says that an employee gets 38 per cent of his or her salary. The rest is eaten up by social security costs. This compares with 45 per cent in Luxembourg and 60 per cent in Britain.

"The issue is now at the top of the political agenda," says a spokesman for Sabena. "How can we compete with British Airways when our social charges are almost three times higher? The politicians have finally realised that these costs are putting the brakes on the creation of jobs in Belgium."

The argument will be music to the ears of Britain's Euro-sceptics and to Mr Major, who for so long has sounded like a lone voice in the wilderness on the debate over the EU Social Chapter. Mr Major has repeatedly argued that the Social Chapter will impose Belgian-style costs on British companies, which will price Britons out of jobs. For this reason, he secured opt- outs from the Social Chapter during the Maastricht Treaty negotiations.

Mr Godfroid's arguments provide further ammunition for the Euro-sceptics, as one of the reasons why social security costs are so punitive in Belgium is the "single currency". Belgium is desperately trying to prove that it is a "good European" by reducing its budget deficit to 3 per cent of GDP, as agreed in the Maastricht agreement's criteria for monetary union.

One Belgian industrialist, who preferred not to be named as he did not want to be known as a Euro-sceptic, said: "What we are doing is sacrificing jobs in Belgium at the altar of the European single currency. There is an incredible paranoia in Belgium of not being in the vanguard of new European ideas.

"Unwittingly, Mr Godfroid has finally started a real debate on Europe here."

In the face of Mr Godfroid's assault, the politicians are in full retreat. Having initially reacted with horror, Jean-Luc Dehaene, the Belgian Prime Minister who had been favoured by Germany and France to succeed Jacques Delors as President of the EU, later responded meekly, saying that "nothing can stop Sabena from moving its staff to Luxembourg".

The row over Sabena comes in the wake of the decision by Hoover two years ago to move a factory from France to Scotland because of lower labour costs.

Most foreign companies still choose Britain as their first-choice investment location in Europe, which suggests that while Mr Major may have not have won many arguments in Brussels, he is winning them on the ground.