VZCZCXYZ0001
RR RUEHWEB

DE RUEHBS #1095/01 0891307
ZNR UUUUU ZZH
R 301307Z MAR 06
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC 1490
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNMEN/EU MEMBER STATES

UNCLAS BRUSSELS 001095 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
STATE FOR EB/ESC, EUR/ERA AND EUR/UBI 
TREASURY FOR OASIA/ICN - ATUKORALA 
USDOC FOR 3133/USFCS/OIO/EUR 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV EWWT EAIR BE
SUBJECT:  BELGIAN STEWPOT: March 17, 2006 
 
REF: (A) 05 Brussels 158 
 
(B) 05 Brussels 3642  (C) 05 Brussels 4384 
 
1-2. How Belgians Make Ends Meet 
3-4. A Permanent Tax Amnesty 
5-6. FDA Talks Confidentiality with Health Ministry 
¶7.   Not Polish Plumbers, but Carpenters 
¶8.   Update on Belgacom Purchase of Telindus 
¶9.   Belgian Trading Shifts Northward... 
¶10.   Expanding the Chocolate Market 
 
--------------------------- 
How Belgians Make Ends Meet 
--------------------------- 
 
¶1.  (U) Although Belgium has one of the highest per capita 
income levels of the EU ($35,749 in 2005), Belgian 
households still struggle to balance their budgets, due to 
high prices for some basics.  Electricity prices, for 
example, are near 30 percent above those of France.  A 
recent survey compared the average Belgian household budget 
of today, broken down by expense type, with that of 15 and 
25 years ago, revealing surprising results. 
 
¶2.  (U) Housing costs have risen from 17.7 to 21 percent of 
a household budget over 25 years.  Adding the costs of 
heating, lights, and water means that 26 percent of family 
income goes to basic housing costs.  Healthcare costs have 
risen from 3.3 to nearly 5 percent, transportation has risen 
from 10 percent to 13.4 percent of expenses, and the 
percentage paid for communications has tripled over the 
period.  To make ends meet, Belgian families now spend less 
on food (15.8% down from 22.2%), clothing (just 4.7%), and 
travel.  Although Belgians are still legendary savers, with 
a savings rate above 8 percent and nearly 70% enjoying 
homeownership, an increasing number of Belgians are in debt, 
and credit counseling is a growing industry. 
 
----------------------- 
A Permanent Tax Amnesty 
----------------------- 
 
¶3.  (U) Following on the highly successful tax amnesty 
program of 2004 (Ref A), the Belgian Federal government has 
decided to institute a version of the program as a permanent 
feature of the tax system.  The program was adopted in late 
December 2005, and on March 15 the implementing regulation 
was issued.  By filling out a fairly short regularization 
declaration and paying an obligatory fine, taxpayers can 
repatriate investment funds held outside of Belgium.  There 
is no fine for work income repatriated if declared before 
June 30, only a five percent fine if declared in the next 
six months, and a ten percent fine if declared in the 
following year.  Given the obligatory fine, these are 
tougher terms than the 6 or 9 percent tax imposed under the 
2004 Amnesty, but more attractive than regular tax terms. 
 
¶4.  (U) Tax advisors lauded the new program, saying many 
persons were unable to take advantage of the 2004 program. 
The government hopes to earn 400 million euros through the 
amnesty program, somewhat under half of what it received in 
¶2004.  More important than the revenue received, however, 
will be the impact of the repatriated capital on the Belgian 
economy; in 2004 an estimated 12 and 15 billion euros were 
returned (not all of it through amnesty program channels), 
which many believe had a role boosting the nation's GDP 
growth to 2.4%, better than the 1.5% registered in 2005. 
The new amnesty program works out to at least 3 billion 
euros repatriated. (Comment:  The government has so far 
avoided the question of whether a permanent amnesty invites 
"moral hazard" and will progressively yield less.) 
 
--------------------------------------------- - 
FDA Talks Confidentiality with Health Ministry 
--------------------------------------------- - 
 
¶5.  (U) On March 10, FDA Deputy D/Commissioner Murray 
Lumpkin and Asst. Commissioner Melinda Plaisier met Belgian 
officials to discuss a possible bilateral confidentiality 
agreement.  A bilateral accord would facilitate information 
sharing about pharmaceutical companies and their 
manufacturing capacity to assist with regulatory oversight, 
and permit advance notification among authorities of public 
actions on pharmaceutical issues, such as the Vioxx 
withdrawal.  D/HHS Secretary Azar, visiting Brussels in 
November 2005, had encouraged Minister Demotte to move 
towards such an agreement. 
 
¶6.  (SBU) Belgium's Health Ministry was represented by 
Johann Van Causter (Director General of Medicines), Els 
Geeraert (Legal Affairs), Alex Monteiro (Minister's 
Cabinet), and Leen Meulenberg (International Relations). 
Van Causter asked for clarifications about the purpose, 
scope, and bilateral applicability of confidentiality 
agreements.  Could Belgium undertake such a bilateral 
agreement within its EU and European Medicines Evaluation 
Agency (EMEA) obligations?  FDA officials answered fully, 
detailing that France and Germany have concluded such 
confidentiality agreements with the US in the past year, and 
 
SIPDIS 
other EU members are arranging the same.  Noting that FDA 
was open to additional Belgian language that would adapt the 
agreement to meet Belgian needs and concerns, Lumpkin 
invited Belgian text additions.  The legal departments of 
FDA and the Health Ministry expect to exchange texts in 
coming weeks, and sounded optimistic about an agreement in 
the next few months. 
 
----------------------------------------- 
Not Polish Plumbers, Polish Carpenters! 
----------------------------------------- 
 
¶7.  (U) Belgium's Construction Federation estimates that it 
is Polish carpenters not plumbers, who threaten the 
livelihoods of Belgian workers.  The trade association 
estimates that Polish construction workers and cleaning 
ladies are the majority of the 100,000 estimated Polish 
nationals working in the informal sector of the Belgian 
economy.  High Belgian wage rates are partly to blame, they 
note: a Belgian union tile-layer gets 40 euros per square 
meter of tile installed, while an illegal Polish worker will 
get only 10 euros for the same work.  The industry 
recognizes the problem, and says it is not against 
engagement of foreign workers - if they use one of the three 
programs for legitimately working in Belgium.  Such work 
permits and foreign firm affiliates are not attractive to 
the sector, however, in part because the taxes and social 
insurance contributions are channeled back to the country of 
origin. 
 
-------------------------------------------- 
Update on Belgacom's Acquisition of Telindus 
-------------------------------------------- 
 
8.(U)  Belgacom, Belgium's leading telecommunications company, 
leading the sector in fixed-line, mobile, internet, and 
broadband communications, has pursued competitor Telindus 
since last Fall (ref B).  The takeover bid was finalized 
February 15, with Belgacom acquiring 98.31% of Telindus 
shares.  On March 15, after the successful closure of 
Belgacom's bid on Telindus Group NV (Telindus), Telindus was 
officially delisted from the Brussels Stock Exchange.  The 
mobile communications component associated with each company 
had posed a problem to the merger: Belgacom is the parent 
company of Proximus, the dominant face of mobile 
communications in Belgium, while Mobistar, the leading 
mobile competitor, is part of Orange Group, which in turn is 
part of the France Telecom Group.  France Telecom had been 
competing with Belgacom to acquire Telindus, which owned 
nearly five percent of Mobistar.  Belgacom has reported 
that, because the Mobistar shares do not represent a 
"strategic stake," after the merger Belgacom will divest 
itself of the Mobistar shares Telindus holds.  This should 
maintain competition in the Belgian mobile telephony sector. 
 
----------------------------------- 
Belgian Trading Shifts Northward... 
----------------------------------- 
 
¶9.  (U) In 2005, the Netherlands has become Belgium's single 
largest trading partner, overtaking the historical trade 
leaders Germany and France.  Because the trade data are 
based on value not volume of exports, the increased prices 
for natural gas and petroleum products are the main cause of 
this development.  Belgian petroleum products enter chiefly 
through the port of Rotterdam and are piped down to Antwerp, 
while the Dutch natural gas is imported from Groeningen. 
Belgium now has a substantial trade deficit with the 
Netherlands, while it has maintained trade surpluses with 
both France and Germany.  The U.S. is still Belgium's fifth 
largest trading partner (with combined imports and exports 
worth 20.6 billion euros in 2005), while the U.K. ranks as 
number four. 
 
------------------------------ 
Expanding the Chocolate Market 
------------------------------ 
 
¶10.  (U) A follow-up on Belgium's chocolate industry (ref 
C):  New Tree Chocolate held its scheduled IPO in the 
Brussels Euronext stock exchange in December, raising over 4 
million euros to permit its expansion plans.  Now a rival 
chocolate maker, Galler, has announced an increase in its 
own capital - from an unexpected source.  Galler 
Chocolatiers has increased by 3 million euros its financial 
base to permit its expansion in London, Lebanon, and Qatar. 
Control of the company remains with the Galler family (52% 
shareholding), but now expands to include 33% holding by 
Lebanese investors and 12% ownership by Qatari nationals, 
including Shief Jassim Mohamed Al-Thani and Tarek Jamal 
Hamid Kassem.  Given the massive petrodollar revenues middle- 
eastern tycoons are currently enjoying, reinvestment in a 
Belgian product of growing popularity holds great promise. 
But will it shift the product mix out of liqueur-filled 
truffles, in respect for the alcohol-free Moslem market? 
 
Korologos