Belgium is "clinically dead"

These are the rather dramatic words of Flemish CD&V MP Eric Van Rompuy—brother of the Herman we know rather better—as reported here:

     Belgium coalition talks back to square one

To update the situation from my last report, the technical talks to try and find a way for each region of Belgium to set and retain a proportion of its own income tax have broken down. Early on, it had become fairly clear that the Parti Socialiste and the Green parties would not budge at all on corporate taxation, but they had appeared to accept the principle of reform of personal income tax, which is at present collected by the federal treasury and distributed to the three regions ... in much the same way as currently happens in the UK.

As I noted before, to split income tax half-and-half as the Flemings want is pretty much what the Calman Commission proposed for Scotland (which the ConDem government in Westminster has committed itself to implement) and what our own Holtham Commission has proposed for Wales. So it looks like the PS is digging its heels in on something that hardly seems very radical on this side of the Channel.

It's hard to say whether the impasse is just brinkmanship or the final collapse. The rhetoric still seems to be more designed for the media than for constructive, down-to-business negotiation ... and the mind boggles at quite what sort of "garden gnomes" Bart De Wever has been offered by the PS.

     

The normal mechanism for resolving a situation like this would be to hold fresh elections. But all the signs are that the French-speaking vote would harden around the PS, and that the Dutch-speaking vote would harden round the N-VA. The second largest party in Flanders, the Christian Democrat CD&V, fully supports the same sort of fiscal autonomy as the N-VA ... and that means a new election would be pointless. The issues to be resolved would be exactly the same.

Personally, I think a deal will be done. The only alternative is for Belgium to split, which would mean that Wallonia would be left with 100% fiscal autonomy. So if they are concerned about losing out financially, it is surely better to retain a degree of tax redistribution through a central Belgian treasury rather than lose it completely.

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Yet politics is not always as pragmatic as that: pride, principles and personality also come into the equation and sometimes people anxious to save face end up by cutting off their noses. But that said, if Belgium does split I think separation will turn out to be a very good thing for Wallonia in the longer term. The socialist politicians in Wallonia have been worried about Flanders with 6m people using a different tax regime to unfairly compete with their smaller population of 3.4m, but it is nearly always the case that the smaller country is able to benefit more from any differential with its larger neighbours. Think Luxembourg; think Switzerland ...

... and think what another country with a population of just over 3m people might learn from their example.