VZCZCXRO0711
RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHBS #1876/01 1581229
ZNR UUUUU ZZH
R 071229Z JUN 06
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC 2059
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 04 BRUSSELS 001876 
 
SIPDIS 
 
SIPDIS 
 
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 TBIO BE
SUBJECT:  BELGIAN STEWPOT: June 6, 2006 
 
¶1.   Introduction 
¶2.   Upbeat Forecast from Planning Office 
¶3.   Belgian Savings Rate Drops 
¶4.   Big Future for Walloon Airports 
¶5.   Antwerp Port Container Traffic Booming 
¶6.   Belgian Competitiveness Weakening 
7-8. American Financial Router Expanding 
¶9.   WANTED: Pan-European Pension Funds 
¶10.  Moving Towards Labor Flexibility 
11-12.Belgian Views on a EURONEXT Merger 
13-14.Combating Phishing for Profit 
¶15.   Belgian Stem-cell Policy Debated 
 
 
¶1. (U) Introduction.  This Stewpot contains a number of 
contradictory indicators regarding the Belgian economy. 
The government's forecast for the economy is positive, but 
inflation is accelerating also.  The private savings rate 
has dropped markedly, even though public debt has fallen 
which makes financing the public deficit is easier.  High 
growth is expected for Walloon airports and Antwerp port 
usage, and yet Belgian competitiveness is weakening 
according to a recent survey. Belgians favor global stock 
market mergers - as long as it impacts their access to 
capital favorably.  Belgian computer technology has 
developed effective anti-phishing software for companies, 
and yet bio-technology research remains constrained by 
political debates over use of stem-cells.  In sum, similar 
to other European economies, Belgium presents a picture of 
contradictory pressures and challenges to both government 
and private sector managers. 
 
-------------------------------------- 
Upbeat Forecast by GOB Planning Office 
-------------------------------------- 
¶2. (U) Belgian Federal Planning Office forecasts GDP growth 
of 2.6 percent in 2006, far higher than the 1.4 percent 
reached in 2005.  This will surpass the Eurozone average, 
expected to reach 2.1 percent GDP growth.  Inflation in 
Belgium will accelerate to 2.4 percent in 2006, higher than 
the Eurozone average of 2 percent, but decline to an average 
of 1.8 percent annually for the 2007-2011 period.  Belgium's 
exports of goods and services, according to the forecast, 
will grow by 5.4 percent annually, as economic recovery in 
key export targets of France, Germany and Netherlands 
progresses.  Two caveats: (1) the projection sees the 
potential export market actually growing by 6.4 percent, 
meaning that Belgium will be losing one percent of market 
share to other countries, annually; (2) the forecast is 
based on oil prices at 60+ dollars per barrel, while current 
prices have now exceeded 72 dollars per barrel. 
 
------------- 
Savings Rate Drops, Interest Rates and Purchasing Power 
Blamed 
------------ 
¶3. (U) Belgians have traditionally had a high savings rate, 
one of the highest in Europe before counting equity accrued 
from the high percentage of home-ownership.  This savings 
rate has fallen from 17.2 percent in 1999 to 12.6 percent in 
2005, however, now at the lowest level in 20 years, while 
the Eurozone savings rate has risen to 14.7 percent. 
Analysts blame the fall on the lowest long- and short-term 
interest rates since the Second World War, which makes 
savings marginally less attractive than consumption.  The 
low interest rates have nonetheless helped the GOB's 
diligent public debt paydown over the past seven years. In 
1993 government debt was 133 percent of GDP, and in 2006 it 
will drop to about 92 percent.  Rather than yielding greater 
capital availability for the private sector, however, low 
interest rates have turned consumers from saving towards 
spending more.  Low interest rates have also spurred housing 
purchases, which has led to lower savings in cash.  The 
Walloon Institute for Sustainable Development blames a drop 
in purchasing power for lower savings, as households try to 
maintain living standards while prices rise.  Importantly, 
the impact of higher oil prices has yet to hit these 
statistics. 
 
------------------------------- 
Big Future for Walloon Airports 
------------------------------- 
¶4.  (U) The Walloon airports of Charleroi and Liege are 
likely to double both their traffic and their employment by 
2015, according to a study by Arthur D. Little consultants. 
Walloon authorities commissioned the study as part of 
the region's redevelopment plan, which holds optimistic 
 
BRUSSELS 00001876  002 OF 004 
 
 
plans for generating business and employment through these 
regional airorts.  In 2005 Charleroi airport (which calls 
itself Brussels South, lying 45 minutes south of the 
capital) recorded 1.9 million passengers; traffic should 
grow at 5 percent annually over the next decade, and freight 
traffic will grow at over 5 percent each year.  The smaller 
airport in Liege, Bierset Airport, is already a hub for 
package courier TNT, and should experience similar growth. 
The consulting firm advises Walloon authorities to develop 
non-aviation related business, low-fee aviation policies, 
and more freight forwarding and cargo work in the region. 
Employment could grow another 6,000 to 10,000 employees in 
direct hires, and many more in indirect employment. 
Brussels airport Zaventem (which transited 16 million 
passengers last year) and Cologne, Germany, will be the 
chief competitors to Walloon airports.  The best news: 
regional authorities will not have to invest to achieve 
these results, as the present management companies of the 
facilities should be able to invest their own funds. 
 
-------------------------------------- 
Antwerp Port Container Traffic Booming 
-------------------------------------- 
¶5. (U) First quarter 2006 shipping at the Port of Antwerp is 
up. The overall volume of cargo overall increased by 1.8 
percent over a year ago, to 40 million tons; container 
volume was sharply up, 9.3 percent over the comparable 
period in 2005.  Automotive shipments rose by 36 percent, as 
over 217,200 cars were handled.  In the first three months 
of the year 3,779 ships were received.  The port's new super- 
container dock facilities continue to be developed by 
private concessionaires Port of Singapore Authority (PSA), 
Pacific & Oriental (P&O) and Mediterranean Shipping Company 
(MSC).  PSA alone is investing 400 million euros (US$ 516 
million) in the new dock area, which ultimately will have 24 
giant gantry cranes on its 5.3 kilometers of dockside. 
Antwerp recently hosted the world's biggest container ship, 
the Cosco Guangzhou.  It is the first super-postpanamax 
container ship, too large for Panama Canal transit; the 
vessel was over 107,200 tons, 350 meters (1,147 feet) long, 
and 140 feet wide, and carried 9,500 TEU (Twenty-foot 
container Equivalent Units) of cargo. 
 
--------------------------------- 
Belgian Competitiveness Weakening 
--------------------------------- 
¶6. (U) According to the Swiss Management Institute's annual 
ranking, Belgium's competitiveness fell from 24th to 27th 
among the 53 countries and 8 regions ranked.  The rating 
compares quality of government administration, business 
climate, and infrastructure.  Belgium earned its best scores 
for medical infrastructure (2), education (5), technology 
infrastructure (8) and importance of international trade 
(9).  Belgium was mid-ranked in terms of its economic and 
business climate, but scored poorly on labor market (46), 
work opportunity (47) and tax burden (57).  Interestingly, 
Belgium came in dead last in terms of encouraging the 
unemployed to seek jobs.  The survey ranked the US, Hong 
Kong, and Singapore as the most competitive locales; the top- 
ranked EU States were Denmark (5), Luxembourg (9), Finland 
(10), and Netherlands (15), while Germany was ranked 26 and 
France 35 out of 61 reviewed investment locales. 
 
--------------------------------------------- - 
American Financial Router Expanding in Belgium 
--------------------------------------------- - 
¶7. (U) SWIFT, the leading interbank financial routing 
service, is expanding its headquarters operations in 
Belgium.  The company's global turnover of 600 million euros 
reflects the 2.5 billion messages it routed last year. Of 
these, Belgian banks and insurers routed 148.7 million 
financial transfers through SWIFT in 2005, a 19.2 percent 
growth rate over 2004.  Swift employs over 2,000 persons 
worldwide, of which half are in Belgium, and anticipates 
adding 200 more employees in 2006. 
 
¶8. (U) Leonard Shrank, the Brussels-resident American 
president of SWIFT, foresees a bright future for the company 
in Belgium.  Each year the volume of SWIFT traffic 
increases, while the company continues to lower the cost of 
transactions for clients.  Shrank terms Belgium "the 
Financial Valley," with Euroclear, Europay, Banksys, and 
other major financial clearing mechanisms all present in the 
country which also hosts numerous European corporate 
headquarters.  He intends to expand SWIFT clients to include 
Microsoft, GE and Solvay; the proposed merger of the 
Brussels Euronext and the NYSE (see para 9) might pump even 
 
BRUSSELS 00001876  003 OF 004 
 
 
more business into the SWIFT network. 
 
---------------------------------- 
SOUGHT: Pan-European Pension Funds 
---------------------------------- 
¶9.  (U) Federal Minister of Economy Marc Verwilghen has a 
plan to attract both capital and financial service sector 
jobs to Belgium: he plans to make Belgium the venue for 
international pension fund management.  Through reforms in 
the fiscal framework, tax structure, and supervisory regime, 
Verwilghen wants to make Belgium into the most attractive 
European venue for pension fund management, targeting first 
European and then global pension funds.  This plan builds on 
Belgium's role as a strategic logistical center for trade 
and Brussels' role as the decision making center for 
European policy.  In an interview May 31, Verwilghen stated 
he intends to structure reforms that will give Belgium a key 
role in the international pension fund landscape. 
 
-------------------------------- 
Moving Towards Labor Flexibility 
-------------------------------- 
¶10.  (SBU) Aware that labor market rigidities are troubling 
employers, Belgium's Federal Government is trying to reach 
agreement on a set on measures to boost labor flexibility. 
PM Verhofstadt seeks to announce a batch of measures before 
the summer recess, and they would be implemented later 
during the year.  However, the two Socialist parties of the 
coalition Liberal/Socialist government, continue to oppose 
far-reaching deregulation of the labor market.  Employers 
and unions feel that the government is venturing into the 
terrain traditionally reserved for the nationwide collective 
bargaining negotiations which will start in the fall.  The 
government prefers to announce major changes on politically 
sensitive subjects just prior to or during the summer 
recess, however, allowing the furor to die down before 
October when Parliament reconvenes.  The next Council of 
Ministers meeting on the subject may help decide whether the 
PM can undertake the reforms employers seek, or will have to 
face-off against union leadership for them. 
 
--------------------------------------- 
Belgian Views on a EURONEXT/NYSE Merger 
--------------------------------------- 
¶11. (U) As one of the four countries whose stock markets 
comprise the EURONEXT trading system, Belgium has definite 
views regarding the merger proposals being offered by the 
New York Stock Exchange (NYSE) and the Deutsche Boerse. 
Federal Minister of Finance Didier Reynders stated that his 
chief objective is to guarantee that Belgium's private 
sector will have access to a financial market with the best 
conditions.  To that end, he wants to assure them a capital 
market that benefits from economies of scale, the synergies 
of lower cost, and the growth of cross-border capital 
mobility.  Reynders also praised Euronext's depth of local 
experience and understanding the national market and 
business community.  He noted that a Euronext tie-up with 
NYSE would be a first choice, as it respects the idea of a 
horizontal models with multiple access points, such as 
Euronext presently offers, with markets in Amsterdam, 
Brussels, Paris and Lisbon.  He seemed less confident that 
the Deutsche Boerse's market model fit this idea. 
 
¶12. (U) Belgium's federal securities regulator, the 
Commission for Banking, Finance, and Insurance (CBFA) 
appears to hold similar views.  CBFA President Eddy 
Wymeersch says he is following the merger discussions 
closely, because he and the regulators in the other Euronext 
countries will have a multinational collaborative role to 
play in supervision of whatever results.  Although Belgian 
companies and federal regulators have a deep interest in 
Euronext, Belgian investors are not as deeply involved. 
Belgian shareholders hold just under one percent of Euronext 
shares, while Netherlands investors hold 3.1 percent, France 
holds 19.1 percent, and UK nationals own 28.5 percent of 
Euronext shares.  Although it may appear to be an inter- 
European issue, US shareholders constitute 36.5 percent of 
Euronext's investors, including Fidelity Management, with 
4.3 percent of Euronext shares. 
 
-------------------------------- 
Combating Phishing for Profit 
-------------------------------- 
¶13. (U) Belgium recently saw its first large-scale attempt 
at phishing which targeted Visa card holders.  "Phishing" is 
a form of Internet fraud where individuals send phony e- 
mails which appear to come from trusted sources to lure 
 
BRUSSELS 00001876  004 OF 004 
 
 
online customers to give up personal and financial 
information.  "Phishers" use customers' online identity to 
plunder bank accounts and/or purchase goods and services. 
Although phishing occurs mostly from Internet servers hosted 
in the U.S. (about 53%), it is becoming more common in 
foreign internet domains in languages like Spanish, French, 
Dutch and German.  In Belgium, the Federal Computer Crime 
Unit (FCCU) of the police force is tasked to combat computer 
crimes. 
 
¶14. (U) EuroISPA, the pan-European association of EU 
Internet services providers, has a secretariat in Brussels 
and recently hosted a forum to discuss coordinated public- 
private approaches to online fraud and phishing.  The 
roundtable endorsed public and private initiatives to 
educate consumers about phishing and encourage industry 
development of technologies to combat the threat.  One new 
approach developed by Vasco Data Security, a Belgian-US 
company, uses a Belgian-developed technology that generates 
one-time security tokens under a "Digipass" system.  This 
method moves away from static log-in information which can 
be stolen by phishers.  Vasco's technology has been bought 
and implemented by around 300 banks worldwide. 
 
------------------------ 
Stem Cell Policy Debated 
------------------------ 
¶15. (U) The Belgian Senate debated stem cell research policy 
during the last week in May without notable result.  The 
four government coalition partners, Flemish and Francophone 
Liberal and Socialist parties, are divided on the issue. 
Liberal parties see it as a question of freedom for the 
enterprise to pursue its own research.  Socialist Health 
Minister Rudy Demotte, trying to avoid turning the human 
body into a source of profit, offered a policy that would 
permit private labs to hold stem-cells collected for the 
future treatment of the donors.  Francophone Liberals would 
amend this law, allowing these banks to be used by all 
persons, but with priority access for the donors.  Demotte 
questions the ethics of not having medical resources equally 
accessible to all people.  Meanwhile biomedical researchers 
remain stymied by the policy incertitude. 
 
Korologos