Table of Contents

The Political Economy of Inter-Regional Fiscal Flows

The Political Economy of Inter-Regional Fiscal Flows

Measurement, Determinants and Effects on Country Stability

Studies in Fiscal Federalism and State–local Finance series

Edited by Núria Bosch, Marta Espasa and Albert Solé Ollé

Struggles over what a region receives, or should receive, from the budget of the central government are common to many countries. Discussions often focus on the measures of ‘net fiscal flows’ or ‘fiscal balances’ provided by the government or other actors. This unique book shows just how these flows are computed then interpreted and clarifies the often misunderstood economic and political motives that explain why some regions receive more monies than others.

Chapter 5: Measurement and Practice of Fiscal Flows: The Case of Belgium

Paul Van Rompuy

Subjects: economics and finance, public finance, politics and public policy, public policy

Extract

Paul Van Rompuy INTRODUCTION 1 This chapter focuses on recent estimates of the federal and inter-regional fiscal flows in Belgium in the framework of the gradual process of devolution that, from 1980 on, transformed it into a federal state. The demand for devolution resulted as early as 1970 in a major constitutional change that distinguished three economic regions (Brussels Capital, Flanders and Wallonia) from two major cultural jurisdictions, that is, the Flemish and the French communities. The small German-speaking community, situated in the eastern part of the kingdom, gained some degree of autonomy in the 1980s. The complexity of the Belgian federal system shows up in the bilingual status of its capital where the two communities overlap. The Belgian process of devolution has been inspired by the idea that the transfer of economic competences that shape important aspects of the supply side of the regional economies would enhance their efficiency and thus contribute to regional economic and social convergence. The cultural differences between the major communities that frequently paralysed decision making within the national government, fuelled the demand for their constitutional autonomy. We first sketch the main institutional stages in the process of state reform. We then explain the particular inter-regional equalization mechanism and highlight the time pattern of the economic inter-regional disparities. Before discussing the recent estimates of the fiscal flows, we will examine the financing system of the regions and communities. The assumptions underlying the estimates and the methodological approach used, will precede the conclusions. More specifically, we...

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