Significance: Belgium's six-month European Union (EU) presidency has faced a number of challenges, including the Irish debt crisis and ongoing rows over the 2011 budget, while political impasse at home has continued to prevent progress towards government formation.

Implications: Most significant for the Belgian presidency have been difficulties in reaching agreement over the 2011 budget, the failure of which might have resulted in the 2010 budget being rolled out into next year.

Outlook: Tackling economic instability will certainly remain top of the EU agenda in 2011, although Belgium's presidency has made important strides in bringing member states together to face these challenges.

Objectives for the Presidency

Belgium’s European Union (EU) presidency began on 1 July 2010, following the rotating leadership system in the EU, and is due to end today. On 1 January 2011 Hungary will take on the role for the next six months, before passing it on to Poland in July. In the new “trio” format created by the 2009 Lisbon Treaty, Belgium has already presented a joint 18-month programme for the presidency alongside Spain and Hungary. The final presidency programme was adopted in Belgium in June 2010 and can be summarised as follows:

• Re-establishing sustainable growth and competitiveness within the EU following the 2008/09 global financial crisis, including a drive towards the sustainability goals of the Europe 2020 strategy, consolidating the Stability Pact and economic governance, and encouraging employment and innovation across the bloc.

• Forging ahead with progress towards a green economy, including the formulation of ambitious environmental targets and the strengthening of legislation relating to the environment.

• Promoting social cohesion, with a focus on combating poverty and social exclusion, as well as achieving concrete objectives like reducing violence against women.

• Continuing the Stockholm Programme, begun under the Swedish presidency, with an emphasis on fundamental rights, privacy, and EU citizenship, as well as stepping up plans for a new European security architecture.

• Expanding the EU as a force for peace and security, with responsibilities to set up the European External Action Service and preside over the EU’s enlargement policy.

Political Stalemate over Belgian Government Formation

Despite federal elections held over six months ago in Belgium, multi-party negotiations throughout this period have not been able to produce a government in the country. As a result, the country’s considerable responsibilities as EU president have been continually shadowed by the spectre of ongoing political stalemate in parliamentary politics. In fact, Belgium has a history of protracted post-election government formation, with negotiations taking eight months to complete following the 2007 federal election. The authorities have thereby been able to function reasonably effectively without a formal government in place and the overall political stability of the country has not been in serious jeopardy.

Nonetheless, as many political commentators have observed, the situation this time has been more precarious than in the past; with the fragile state of Belgium’s economy and a large budget deficit to tackle, the delays in forming a government have carried greater structural risks to the country. Most of all, the problem has been the lack of common ground between the parties involved in the negotiations. In Belgium’s June 2010 election, a pro-separatist party, the New Flemish Alliance (N-VA), received the most votes and accordingly gained a seat at the negotiating table. Although the NVA has claimed that it is in no hurry to separate the country along linguistic lines, non-Flemish parties have been highly wary of entering a coalition with the NVA. Consequently, Belgium has been presided over by the defeated pre-election government since June.

It can be argued that Prime Minister Yves Leterme and his Flemish Christian Democratic alliance have therefore achieved relative success in assuming the EU presidency given the fragility of their capacity as government caretaker. Yet, perhaps owing to this relative weakness, Belgium has needed to drop some of its own national preferences and embrace the “community spirit” as EU president.

Tackling the Eurozone Crises

When Belgium assumed the presidency in July, the EU was already embroiled in a financial crisis that has since threatened the future of the Eurozone and economic stability across the bloc. During this period, Greece, Ireland, Spain, Portugal, and even Belgium itself were all included in debt rating downgrades or warnings. After Ireland defaulted on its deficit payments, Greece and France drove through measures to establish a permanent bailout mechanism for potential future financial crises, agreed in the EU summit in December. Although there was some resistance from member states over a permanent fund and calls for alternative measures, including the adoption of joint Eurozone sovereign bonds, the Franco-German plan won out. Germany has taken a strong stance over fiscal austerity and was able to use its leverage during the negotiations as a result of its large contribution to the EU’s multi-billion-euro bailout of member states throughout 2010. In fact, Belgium itself preferred a short-term increase in the 750-billion-euro (US$1,004 billion) emergency fund, currently in place, in contrast to a permanent bailout mechanism. As an example of abiding to the principle of “honest broker”, the Belgian government took the decision to drop its own national preference, enabling consensus to be achieved over the Franco-German proposal.

Other measures relating to the safeguarding of EU economic stability also include the establishment in September of a European Systemic Risk Board to warn of possible financial crises. In December, the European Commission outlined proposals to enforce more stringent measures on financial institutions and individuals that break supervision rules, and for these to be applied more consistently across the bloc. A few days later, the Committee of European Banking Supervisors revealed tough new restrictions on banks relating to staff bonuses. These developments all come on the back of the 2008/09 financial crisis, with the Belgian presidency furthering stated EU objectives to enforce greater discipline, security, and transparency in the financial sector.

Eventual Compromise over the 2011 Fiscal Plan

Reaching agreement on the 2011 budget has, meanwhile, proved a monumental task for the Belgian presidency. Negotiations first faltered in September 2010 after members of the European Parliament (MEPs) demanded a 6% increase in the annual EU budget as well as a pay rise for EU institution employees. MEPs also asked for an enhanced say in future budgetary decisions, relating to the EU’s multi-annual financial framework for 2013-20. A number of member states, in particular the United Kingdom, Germany, France, and the Netherlands, were strongly opposed to the idea of greater EU budgetary contributions, particularly in view of the tightening government purse strings at home. After almost three months of “conciliatory talks”, MEPs eventually agreed to a 2.91% increase in budgetary contributions, although they were forced to accept a fairly limited role in future budgetary negotiations. Member states, however, agreed to raise the wages for EU institution employees (even though this increase was a drop in the ocean as compared to the EU’s overall 126.5-billion package for 2011). In light of the time taken to reach agreement and the fact that the final deal was achieved so close to the new year, there was considerable relief in Brussels and across the EU. In the event of no deal being reached, the 2010 budget would have been rolled out into the new year, effectively representing a budgetary decrease in real terms.

EU Foreign Policy

The EU’s flagship European External Action Service (EEAS) has now been launched, with the ambition to give the bloc a more active and coherent voice on the global stage. Under Belgium's presidency, a compromise was forged over staffing, financing, and the 2010 budget, which enabled the EEAS to be opened formally on 1 December.

Regarding objectives for EU enlargement, which have effectively been stalled since the 2008/09 global financial crisis, the Belgium presidency has needed to preside over acrimonious debates on the accession of Turkey and some of the Balkan countries. Once again, the Belgian government has diligently aimed to be an “honest broker” in the negotiations, even dropping its previous national opposition to opening accession talks with Serbia. Partly as a result of Belgium’s new position, the Netherlands eased its stance over the issue. However, little progress has been made by Turkey in the area of competition policy, as part of its EU accession bid, resulting in talks scheduled for 22 December being cancelled.

Belgium also played an instrumental part in accelerating progress towards a Free Trade Agreement (FTA) with India while negotiations towards a trade accord with Mercosur have continued on a stable footing, following the previous stalemate in negotiations. Pakistan was, meanwhile, granted trade concessions in response to the widespread devastation in the country after the July monsoon floods. Perhaps most significant, Belgium’s EU presidency presided over the signing of a FTA with South Korea. The ambitious agreement is estimated to be worth some 19 billion euro in new trade for EU exporters through removing virtually all tariffs between the two economies, in addition to many non-tariff barriers.

Outlook and Implications

Belgium’s EU presidency is especially notable as it has been achieved under the framework of the 2009 Lisbon Treaty. The Lisbon Treaty has diminished some of the powers of the presidency office, in particular through the creation of a permanent European Council president and a High Representative for Foreign Affairs. As a result, the EU presidency now needs to employ a more facilitative position during member state negotiations and aid the manoeuvring between the additional bodies during discussions. In addition, in order to push forward legislation, the EU presidency is expected to engage in “trialogue” discussions, held between the European Commission, European Parliament, and Council of Ministers.

The Lisbon Treaty has also introduced the “enhanced co-operation” procedure. This mechanism has in fact been employed in recent months over the drive towards a common EU patent system. A group of member states in November announced their intention to forge ahead with a simplified and cheaper common patent system, and Belgium was required to oversee these negotiations.

Belgium’s EU presidency has represented a relative success despite the numerous political difficulties at home. The vice-president of the European Parliament, the United Kingdom’s Edward McMillan-Scott, has expressed widespread praise for the country’s efforts: "For a small country, with well-known current problems, Belgium has overseen issues like the euro crisis, the budget stand-off and the start of 'Lisbon Europe' with calm deliberation, commitment and verve." The only obvious failure is the standstill in negotiations over Turkey’s potential accession to the EU, while there are looming concerns over future negotiations over the EU’s long-term budget. There is also some consternation in Brussels about Hungary assuming the helm on 1 January 2011, owing to a controversial new media law in the country. Although the Hungarian government has sought to dampen this criticism, the Eastern European country will be firmly in the spotlight as it takes over tomorrow, with the first task to preside over the momentous achievement of Estonia adopting the euro.