BELGIAN STEWPOT: March 17, 2006

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

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How Belgians Make Ends Meet
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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.

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A Permanent Tax Amnesty
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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.)

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FDA Talks Confidentiality with Health Ministry
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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.

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Not Polish Plumbers, Polish Carpenters!
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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.

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Update on Belgacom's Acquisition of Telindus
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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.

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Belgian Trading Shifts Northward...
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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.

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Expanding the Chocolate Market
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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