VZCZCXRO0429
OO RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHBS #3836/01 3200730
ZNR UUUUU ZZH
O 160730Z NOV 06
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3625
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 BRUSSELS 003836 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF/S, EB/ESC AND EUR/UBI 
USDOC FOR 3133/USFCS/OIO/EUR 
TREASURY FOR OASIA - ATUKORALA 
PARIS FOR USOECD - BARLERIN 
 
E.O. 12958: N/A 
TAGS: ECON ELAB BE
SUBJECT: HIGH BELGIAN UNEMPLOYMENT PERSISTS 
 
 
¶1. (U) Summary.  Belgian unemployment remains high on average 
by national standards, 8.6 percent, and rose in the past year 
despite good EU and global economic growth rates.  The 
French-speaking regions of Wallonia and Brussels register 
over 19 and 21 percent unemployment respectively, reflecting 
a working age population lacking skills sought by employers. 
Improving educational standards and worker re-training 
programs, and possibly rethinking Belgium,s generous 
unemployment benefits, will be essential in addressing the 
country,s entrenched unemployment problem.  End Summary. 
 
¶2. (U) Despite stronger than expected GDP growth rates in 
2005 (2.4 percent) and 2006 (2.7 percent forecast), Belgian 
unemployment moved slightly higher in October, registering 
8.6 percent, up 0.6 percent from a year earlier.  Although 
Belgium,s highly trade-dependent economy has been more 
resilient and performed better than its key markets of 
Germany and France in recent years, serious job growth never 
followed.  This troubles Belgian analysts, and underscores 
persisting structural problems; forecasts for Belgium in 2007 
foresee the economy slowing to 2.2 percent growth, implying 
further challenges to employment growth. 
 
¶3. (U) Broken out regionally, the unemployment situation is 
even more striking.  In Flanders and the dynamic Antwerp port 
region, unemployment is under the national average.  Strong 
profits in the petroleum, chemicals and refining sector, as 
well as active foreign investment in bio-pharmaceuticals and 
other new technologies, coupled to high productivity levels, 
account for stronger demand for workers.  In Wallonia, 
conversely, unemployment reached a record of almost 290,000 
people, 19.4 percent of the working age population.  In the 
past twenty years, Walloon unemployment has never dropped 
below 17 percent. 
 
¶4. (U) The Walloon Enterprise Federation blames this weak 
performance ) despite a favorable national and global 
economic climate ) on weak skills.  Nearly half of the 
Walloon unemployed have not completed secondary school 
education.  Professional and vocational training programs 
have been weak, job losses in old industries such as steel 
have not been counterbalanced by new investments.  The 
Walloon &Marshall Plan8 that Walloon authorities started a 
year ago aims to attract new high tech industries with growth 
potential.  It has registered some successes, but these 
sectors tend to engage fewer, more highly skilled and younger 
employees, rather than soaking up the workers who have lost 
their positions through regional closures have generated. 
The Marshall Plan has yet to inspire confidence:  in a poll 
in September only 20 percent of Walloon CEO surveyed had 
confidence the Plan would succeed. 
 
¶5. (U) In terms of attracting foreign investors, Wallonia is 
challenged linguistically:  while 75% of Flemish students 
claim to speak English, only 30% of Walloon students claim to 
do so.  This is a serious drawback, given the ubiquity of 
English as a global commercial language.  In addition, there 
is a gap in critical math and science skills.  The OECD,s 
2003 PISA study showed Flemish students, scores exceeded 
those of top-rated Finland, but their Walloon counterparts, 
scores were scarcely average. 
 
¶6. (U) Finally, Wallonia struggles not only with its regional 
problems, but labors under the federal context of very high 
worker social program contributions governed by national law. 
 The standing tax rates and entitlements impose a cost on the 
employer equal to over two-thirds of the worker,s base 
salary.  Restrictive labor laws making weekend and off-hours 
either very expensive or prohibited altogether are another 
burden for investors.  Given the attractions of flat-tax 
havens elsewhere in the EU and low wage rates in Eastern 
Europe, Belgium,s competitiveness on labor issues is 
relatively poor.  The generous national unemployment 
structure also gives little incentive to the jobless to seek 
positions, as entry-level jobs may pay little more than 
unemployment benefits.  To be fair, the government has 
recently announced incentive programs to reduce some of these 
costs. 
 
¶7. (U) The Brussels capital region suffers even greater 
unemployment than Wallonia, 21.2 percent, which is actually a 
drop of 0.6 percent from a year earlier.  The reasons it 
remains high in Brussels are partly demographic:  a 
concentrated immigrant population, often from North Africa or 
Turkey, lacking language and other skills, may not match the 
demand posed by employers.  Although Brussels is in the 
 
BRUSSELS 00003836  002 OF 002 
 
 
middle of a construction boom, building companies have been 
engaging workers from other EU countries to fill their needs; 
6,800 Poles were registered in Belgium during the past five 
months under the new EU labor migration rules, most of them 
to work in the construction sector. 
 
¶8. (U) Belgium overall, and Brussels in particular, stands to 
lose jobs in the automobile industry, as that sector faces 
cuts and relocations due to global competition.  In early 
November Volkswagen announced its plant in suburban Brussels 
may shed 1,000 positions in the next year, and Opel, Ford, 
and Volvo factories in Flanders may be trimming their labor 
needs given global restructuring. 
 
¶9.  (U) Regional differences in trade union militancy are 
another factor limiting competitiveness in the 
French-speaking areas.   Wallonia,s ruling political party, 
the francophone Socialist (PS) is unlikely to press workers 
to accommodate employers, federation demands.  Despite the 
tradition of tripartite talks ) union, employers, 
federation, and the government mediating ) Walloon business 
leaders reveal low confidence in the government role; 59 
percent of them called the PS an obstacle to economic revival 
in the region. 
 
Korologos 
.