VZCZCXYZ0000
RR RUEHWEB

DE RUEHBS #2164/01 1841203
ZNR UUUUU ZZH
R 031203Z JUL 07 ZDK
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC 5807
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNMEN/EU MEMBER STATES
RUEHRB/AMEMBASSY RABAT 2356

UNCLAS BRUSSELS 002164 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/OIA, EB/TPP/IPE AND EUR/UBI 
TREASURY FOR OASIA/ICN - ATUKORALA 
USDOC FOR 4212/OECA/JLEVINE 
RABAT for W. BUSH 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINT EINV SENV BE
SUBJECT:  BELGIAN ECONOMIC STEWPOT: June 25, 2007 
 
 
1-2. Strong Macro-Economic Outlook 
¶3. Belgian CO2 Emissions Fall - Finally 
4-5. Private Equity Investment Booming in Belgium 
¶6.   Belgian Film Industry Prospers 
7-8. Fewer Belgians Traveling to the U.S. 
¶9.   Belgian Beer Exports Up 
¶10.  2007 Budget derailed? 
 
 
 
----------------------------- 
Strong Macro-Economic Outlook 
----------------------------- 
¶1. (U) Belgium's macro-economic outlook is quite 
favorable, according to projections released by 
the Belgian National Bank (central bank). The BNB 
revised the 2007 GDP growth estimate upward from 
2.1 to 2.5 percent, compared with 3.0 percent 
growth reached in 2006.  BNB forecasts 2008 GDP 
growth at 2.2 percent.  Inflation continues to 
drop, from 2.3 percent in 2006 to 1.6 percent in 
2007, and is expected to hold at about that level 
in 2008. Public debt should drop to 85.6 percent 
of GDP by the end of 2007, and reach 82.7 percent 
in 2008. While still above the EU objective of no 
more than 65 percent of GDP as public debt, it 
reflects remarkable progress from the 134 percent 
Belgium faced in the last decade. 
 
¶2. (U) With falling unemployment, Belgian 
companies face labor shortages.  Unemployment 
should average 7.6 percent in 2007 and could drop 
to 7.2 percent in 2008, down from 8.2 percent in 
¶2006. The Federation of Belgian Employers (FEB) 
claims that 300,000 positions are unfilled in the 
country, 120,000 of them in fields where Belgium 
lacks qualified employees. Even in francophone 
Wallonia, with unemployment rates of up to 25 
percent in certain areas, some employers struggle 
to find employees with necessary skills. 
Belgium's delay in fully opening its labor 
markets to workers from the "new" EU-ten member 
states eliminates a relatively easy means to 
address the problem.  The FEB fears that skilled 
labor shortage will lead to upward pressure on 
wages, ultimately boosting inflation, and 
hampering competitiveness.  Addressing Belgium's 
constrained labor market ? and regional/sectoral 
stubborn unemployment ? is a key issue in the 
negotiations to form a new government following 
the June 10 federal elections. 
 
---------------------------- 
GHG Emissions Fall - Finally 
---------------------------- 
¶3. (U) In a new study released by the European 
Environment Agency, data show that Belgium's 
greenhouse gas emissions actually dropped in 
2005, declining by 2.6 percent over 2004 (outside 
the aviation sector).  Earlier data showed 
Belgian output still climbing.  This rate was 
significantly better than the EU-15 as a whole, 
which registered only a 0.8 percent drop.  In 
actual quantities, Belgium produced 143.8 million 
tons of greenhouse gases (CO2 among others) in 
2005, which is 2.1 percent less than it generated 
in 1990, the Kyoto Protocol baseline year.  The 
good news is tempered by the fact that some of 
the reduction was due to an unusually mild 
winter, and growing popularity of diesel cars ? 
which are marginally more fuel efficient. We 
await final data from 2006 to see if Belgian 
emissions are really trending downward or if 2005 
was an exception.  Belgium will need to record a 
similar rate of progress for several years to 
achieve its target of a 7.5 percent reduction of 
1990 emissions by 2012. 
 
-------------------------------------------- 
Private Equity Investment Booming in Belgium 
-------------------------------------------- 
¶4. (U) A survey conducted for the European 
Venture Capital Association, in partnership with 
the Belgian Venture Association (BVA) found that 
private equity (PE) investment in Belgian 
companies nearly tripled in 2006. Total PE 
investment in Belgium was 855 million euros in 
¶2006.  From 2005 to 2006, foreign private equity 
firms increased their investments in Belgium by 
61%, and now account for 39% of private equity 
investments in Belgium.  Apart from a one-time 
investment of 750 million euros in 2004, this is 
the highest level of foreign investment in 
Belgium in the past six years.  For their part, 
Belgian private equity investors increased their 
investments abroad by 59%.  Total private equity 
investment by Belgian investors, both at home and 
abroad, quadrupled from 2005 to 2006, from 193 
million euros to 940 million euros.  Most of this 
investment was in venture capital and buy-outs. 
Investment in the high-tech sector increased 
modestly, while non-high-tech investment showed a 
dramatic increase. 
 
¶5. (U) The trends are consistent with overall 
foreign direct investment (FDI) in Belgium.  The 
UN Conference on Trade and Development (UNCTAD) 
World Investment Report 2006 found that the stock 
of FDI in Belgium more than doubled between 2002 
and 2005, with an annual growth rate of 29%. 
Belgium represented 5% o the total world stock 
of FDI in 2005.  Guy Geldhof, Secretary General 
of the BVA, believes that the high level of 
investment in Belgium reflects a general trend 
upwards in the level of private equity investment 
in all of Europe, boosted by a large number of 
buy-outs and investments in expansion capital. 
Foreigners ar attracted to Belgium because it 
has a highl open economy and consists of many 
medium-size enterprises with reasonable 
valuations, making acquisitions affordable. 
2007 is likely to be another banner year for 
private equity investment in Belgium, as several 
major Belgian PE firms have already reached their 
2006 numbers only halfway through the year. 
 
------------------------------ 
Belgian Film Industry Prospers 
------------------------------ 
¶6. (U) Belgians see an average of 2.5 movies each 
per year.  While most are foreign films, the 20 
to 25 Belgian-made films each year are growing in 
popularity.  Flemish filmgoers like movies that 
are spin-offs of successful TV shows; these 
rarely play well in the francophone south. 
Walloon films will play well in Flanders ? 
especially if the Walloon flick is produced with 
French counterparts and gets recognition at the 
Cannes film festival.  Belgian movie directors 
often have successful film debuts, but due to 
problems with funding, casting, and production, 
many are unable to continue that success.  To 
foster the industry, both Walloon and Flemish 
community governments subsidize film-making; the 
French Community allocating 9.3 million euros in 
2006 for it, and the Flemish Audiovisual Fund 
allocating 9.75 million euros to it. 
 
--------------------------------------- 
Fewer Belgians Traveling to the U.S.... 
--------------------------------------- 
¶7. (U) Despite the Visa Waiver program that 
exempts Belgians from a visa requirement for 
travel to the U.S., and despite a highly 
favorable Euro-to-dollar exchange rate, fewer 
tourists in 2006 traveled across the Atlantic for 
their vacations.  According to the Belgian Tour 
Operators Association (ABTO), organized group 
tours to the New World fell 20% between 2005 and 
¶2006.  This was confirmed by Carlson Wagonlit 
Travel, the top travel agency network in Belgium. 
"Tourist travel to the US has diminished by at 
least 15%. 
 
¶8. (U) The 15-20 percent drop-off in Belgian 
tourism parallels other European rates: in 
comparison to the year 2000, the number of 
British tourists to the States in 2006 dropped 
11%, German tourism dropped 22%, and French are 
down 28%.  On the other hand, notes Gillis, the 
number of people traveling for business purposes 
is up 10-12 percent over the course of the last 
12 months.  Cheap prices do attract some 
visitors, however: the number of plane tickets 
purchased by students and backpackers increased 
by 15 percent in 2006. 
 
------------------------------- 
Belgian Beer Exports Heading Up 
------------------------------- 
¶9. (U) According to the Belgian Brewers 
Association, 2006 was a very good year.  Although 
domestic beer consumption decreased by 1.1 , 
production at Belgium's breweries grew by 6  and 
net exports increased by 15 .  Exports now 
account for 55 percent of total Belgian beer 
production.  Despite the small decrease in 
domestic consumption, beer remains the preferred 
alcoholic beverage of choice in Belgium ? 89 
liters (27 gallons) consumed per resident.  The 
slight decrease is likely the result of changing 
consumption habits and fewer people frequenting 
hotels, restaurants, and cafes.  Belgian brewers 
have been investing more in production and in 
developing better packaging and promotion for 
their expanding foreign markets. 
 
--------------------- 
2007 Budget derailed? 
--------------------- 
¶10. (U) A memorandum from the Finance Ministry 
shows a shortfall of some 600 million euros over 
earlier projections for the first five months of 
this year.  To make matters worse, the European 
Statistical Office has ruled against budgetary 
measures such as the sale of uncollected taxes to 
banks and other financial institutions, a measure 
which the Verhofstadt government was hoping would 
bring in some 160 million euros in 2007 revenues. 
If one also takes into account the Christian- 
democratic party objections to one-shot budgetary 
measures, such as the takeover of pension funds 
and the sale of government buildings, another 1.3 
billion euros extra will have to be found by the 
next government coalition, bringing the total of 
extra revenues/cuts needed to more than 2 billion 
euros. 
FOX