* Belgium, like Dutch and French, falling behind Germany
* Lack of sense of crisis saps drive for reform
* Stagnation casts doubt on viability of Benelux region
By Robin Emmott and Ben Deighton
CHARLEROI, Belgium, March 28 Just a day after
giving birth, Belgian entrepreneur Esmeralda Desart was back at
work running her export business, putting in the kind of 16-hour
day that has become the norm since she started up a company
selling printer parts in 2007.
Refused bank loans, looking after a baby was just one more
concern as Desart confronted the problems of red tape and rising
costs that entrepreneurs say are making her homeland at the
heart of the euro zone a bad place for business.
Her struggle to set up a company is emblematic of the wider
frustration among entrepreneurs, who say Prime Minister Elio Di
Rupo's boast to global business leaders at Davos that "Belgium
is back" as a centre for innovation has a hollow ring.
"They don't make it easy," Desart, 44, said at her
prefabricated orange office near Charleroi airport, south of
Brussels. "And I only employ 15 staff. If Europe is going to
create jobs, they need thousands of people like me."
Desart left a steady job with little more than her savings
and her enthusiasm to set up an Internet-based business set to
generate 15 million euros ($19 million) in sales this year.
A small regional grant she obtained requires her to run
operations from a drab industrial park near Charleroi, away from
her family in Brussels.
Trying to emerge from three years of crisis, the European
Union has mandated deep reforms to help revive the continent's
weakened economy, but Belgium, home to the EU's headquarters,
has enacted very few of those changes.
Italy, Spain and Portugal have been forced to confront
bloated public finances and fading business dynamism. But
entrepreneurs in wealthier northern nations like Belgium say
their governments feel no such urgency to cut regulatory red
tape, confront powerful trade unions and modernise.
Belgium, France, Luxembourg and the Netherlands have been
struggling with stagnation since 2011 and are neither keeping up
with Germany nor reforming like southern Europe.
That could potentially shrink the euro zone's core, and cast
more doubt on the bloc's credibility with investors.
Belgium is struggling to remain a dynamic, hi-tech economy
with the world's 12th highest per capita income at the centre of
the 17-nation currency area.
The country fell eight places in the World Bank's ranking on
the ease of starting a company this year compared to 2012, to
44th place out of 185 economies. When it comes to the ease of
doing business, it slipped two spots to 33th place.
"Belgium must decide whether it is part of northern or
southern Europe," said Jo Libeer, the head of the business
chamber in Flanders, the country's wealthy northern region that
has an ageing population and a growing mismatch between workers'
skills and the jobs on offer.
Take the "Uplace" shopping centre planned for Mechelen, just
north of Brussels, a development that would revive an abandoned
area next to a former Renault car factory, to create 3,000 jobs.
Its backers hoped the luxury mall and offices would open
last year, having secured the site in 2007. But a long list of
permits - including one needing the approval of 14 government
agencies - has meant it will now not open until 2016.
In Brussels, telephone company Belgacom has been
blocked from installing a new, high-speed "4G" mobile network
already used in Germany and the United States because of the
city's strict radiation regulations.
"People need 4G, and what does Brussels say to them? Fuck
you," Didier Bellens, Belgacom's head, told reporters.
Bureaucracy is swollen by Belgium's division into three
regions and three partially overlapping linguistic communities,
plus cities and local councils. In total, the country of 11
million people has six parliaments.
Such obstacles might be overlooked in boom times, but the
economies of Belgium and the Netherlands will shrink for the
second straight year in 2013, after a recession in 2009, while
Germany is likely to see its output rise slightly.
With their trade-friendly location between Germany's
industrial belt and the North Sea, Belgium and the Netherlands
traditionally tracked or outperformed their biggest trading
partner. But since 2010, Germany has been pulling ahead.
Belgium is the worst performer. Compared to regional peers,
salary costs are more than 10 percent higher than the average in
Germany, France and the Netherlands. What is more, the gap is
widening, according to the Federal Planning Bureau, the agency
on whose data the government bases its budgets.
One reason is that Belgium and Luxembourg are the last
countries in Europe to keep automatic wage indexation, meaning
wages go up in line with inflation regardless of productivity
and the wider economy.
Administrative charges on companies rose 7 percent from 2008
to 2010, reversing a previous fall, the Federal Planning Bureau
said, because Belgium has been slower than other countries to
move services online.
According to data collected by retailers' lobby Comeos,
Belgian firms pay as much as 25 percent more to employ someone
than neighbouring countries.
"The hourly cost of wages is the highest in the whole euro
zone," central bank governor Luc Coene told Le Soir newspaper.
"The first thing to do is to reduce the charges on employment."
That is a result of trade union power in Belgium, where
unionisation is second only to Nordic countries in Europe.
Major decisions must be agreed with the unions, causing
deadlock on many issues relating to labour reform and wages. One
large Belgian retailer spent 10 years negotiating with unions
before it could open 30 minutes earlier on Saturdays.
"We have this tradition of discussion and agreement, but now
we've gone too far," said Dominique Michel, the head of Comeos.
"We start negotiating and it takes forever, and that's a very
REFORM FOR ALL
With youth joblessness as high as 40 percent in some parts
of Brussels, and national unemployment at a 15-year high,
Belgium is nearing a critical point.
Ford Motor Co closed its car plant in the eastern city
of Genk last year, moving the production of its Mondeo mid-size
cars and Galaxy minivans to Spain in search of cheaper labour.
Caterpillar, the world's largest maker of
construction equipment, plans to cut 1,400 jobs at a plant near
Charleroi due to the high costs of operating in the country.
"Factories are being moved from the north to the south as we
speak," Jeroen Dijsselbloem, the Dutchman who chairs meetings of
euro zone finance ministers, told the European Parliament in
March. "Reform isn't just an issue for the south. It is
basically an issue for all countries."
Prime Minister Di Rupo says Belgium is one of the world's
most open economies and he promised in Davos his government
would do "our utmost to make sure that our economy will be one
of the most creative in the world".
But the country's leading politicians have declined to take
on the unions, leaving companies increasingly reliant on
temporary contract workers who go from job to job.
Di Rupo's message also jars with the experience of
entrepreneurs such as Desart, at a time when Europe's future
rests on the shoulders of people like her.
"We don't have a God-given right to prosperity," she said.
"Northern Europe's future lies in services and innovation, not
in big factories, but we need governments and banks behind us.
If we can't reform, why should our businesses even exist?"