Belgium put on austerity diet

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The Independent Online

Associated Press

Brussels - Belgium, forced into a budgetary straitjacket by the European Union, announced austerity measures intended to save 100bn francs (pounds 2bn) in order to stay on course for the EU single currency.

With new taxes and social-security cuts, the Prime Minister, Jean-Luc Dehaene, plans to reduce the 1996 budget deficit to 3 per cent of gross domestic product, a strict requirement for joining a core of EU nations that plan to forge ahead with a single currency in 1999.

The centre-left government slapped new taxes on petrol, and increased VAT and taxes on savings and some pensions. Health and welfare spending were cut.

The budget also foresees stepping up a fight against tax fraud and plans to sell of some government properties - including the embassy in Tokyo.

"We are taking today a decisive step, because the reduction of the deficit to 3 per cent is indispensable for our integration into the European Union and to reduce our debt," Mr Dehaene told parliament.

After spending freely in the 1970s and early 1980s, Belgium has amassed the biggest overall debt in the EU as a percentage of GDP, and has been trying for years to curb it. Mr Dehaene said the overall debt reduction was imperative but it was still expected to stand at 131.1 per cent of GDP next year, only marginally down from a projected 134.2 per cent in 1995.

In an effort to stimulate job- creation, Mr Dehaene also said the government will waive employer contributions for salaries up to 60,000 francs (pounds 1,350) a month.

The government hopes the move will cut the number of jobless by 27,000 in 1996, after an expected rise of 1,300 in 1995. Some 630,000 people or 14.9 per cent of the population were without work in August.