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Chapter 1 The impact of the crisis on the health system and health in Belgium Irina Cleemput, Joeri Guillaume, Carine Van de Voorde and Anna Maresso Introduction The international economic crisis began in Belgium in 2008, as it did for other European countries, but its effects on public sector spending were not immediately or deeply felt for several reasons, including having a caretaker government in place between June 2010 and December 2011, a period in which major policy decisions could not be taken. However, in 2012, the new government had to implement a package of austerity measures to make €11.3 billion worth of public sector savings, of which €2.3 billion were in the health sector. Prior to 2012, the health budget had been cushioned from any cuts by two factors: the existence of a long-standing and generous growth cap, which effectively guaranteed a 4.5% annual increase in the health budget every year; and the existence until 2012 of health budget surpluses that could be drawn from. In 2012, no growth cap was applied, and given the new economic climate, much smaller ones were applied in 2013 and 2014. Despite these favourable circumstances, the impact of the crisis from 2012 galvanized policy-makers into realizing that the status quo was no longer an option and that efficiency measures were needed in the health care sector. At the same time, attention was paid to maintaining and enhancing financial protection mechanisms for economically vulnerable groups.

4 Economic crisis, health systems and health in Europe: country experience 1. The nature and magnitude of the financial and economic crisis 1.1 The origins and immediate effects of the crisis Several hypotheses exist for the triggers of the financial and economic crisis in Europe. One hypothesis is that the main source was loose fiscal discipline: fiscal optimism led to economic overheating, which, in turn, led to wage and price increases, reducing competitiveness and finally inducing an imbalance in the balance of payments. Another hypothesis is that the economic crisis was triggered by the crisis in the banking sector: increasing private sector expenditure was financed by the banking sector, but the credits were used suboptimally. In a context of low interest rates, consumers and companies consumed and invested upfront, speculating on future growth. At the same time, the banks did not manage the credit risk in a prudent way (Constâncio, 2013). However, the banking crisis was also partly a result of the global crisis in financial markets. 1.2 Government responses to the crisis A number of European banks had substantial balance sheet exposures to the housing market in the United States. Faced with losses on several of their assets, banks rebalanced their portfolios by increasing their holdings of so-called safe government bonds. However, in the meantime, some banks risked failure, forcing their governments to step in and recapitalize these banks to protect citizens' savings; this at a time when public finances were already under huge pressure because of the recession-induced collapse in tax revenues (Constâncio, 2013). This also happened in Belgium. The Belgian Government made almost €21 billion of capital injections in the banking sector between 2008 and 2009 (De Leeuw, 2010). In addition, the government guarantees the saving deposits of Belgian citizens up to €100 000 per person. Because of the imminent failure of several banks, the government decided to inject fresh capital into the sector, hoping for a recovery in the economy. The conditions imposed were mainly limited to (a higher) representation on the board of directors of the bank. The funds came from regular government receipts, collected through direct and indirect taxes, capital taxes and non-fiscal receipts. 1.3 Broader consequences: how well prepared was Belgium for an economic shock? The impact of the global financial crisis on Belgium's gross domestic product (GDP) was similar to the impact in other countries. The impact became apparent in mid-2008 and in the first semester of 2009, when the GDP per capita was 4% lower than the year before. The economy recovered slowly, and

Chapter 1<br />

The impact of the <strong>crisis</strong> on the <strong>health</strong><br />

system <strong>and</strong> <strong>health</strong> in Belgium<br />

Irina Cleemput, Joeri Guillaume, Carine Van de Voorde <strong>and</strong> Anna Maresso<br />

Introduction<br />

The international <strong>economic</strong> <strong>crisis</strong> began in Belgium in 2008, as it did for<br />

other European countries, but its effects on public sector spending were not<br />

immediately or deeply felt for several reasons, including having a caretaker<br />

government in place between June 2010 <strong>and</strong> December 2011, a period in<br />

which major policy decisions could not be taken. However, in 2012, the<br />

new government had to implement a package of austerity measures to make<br />

€11.3 billion worth of public sector savings, of which €2.3 billion were in the<br />

<strong>health</strong> sector.<br />

Prior to 2012, the <strong>health</strong> budget had been cushioned from any cuts by two<br />

factors: the existence of a long-st<strong>and</strong>ing <strong>and</strong> generous growth cap, which<br />

effectively guaranteed a 4.5% annual increase in the <strong>health</strong> budget every year;<br />

<strong>and</strong> the existence until 2012 of <strong>health</strong> budget surpluses that could be drawn<br />

from. In 2012, no growth cap was applied, <strong>and</strong> given the new <strong>economic</strong> climate,<br />

much smaller ones were applied in 2013 <strong>and</strong> 2014. Despite these favourable<br />

circumstances, the impact of the <strong>crisis</strong> from 2012 galvanized policy-makers<br />

into realizing that the status quo was no longer an option <strong>and</strong> that efficiency<br />

measures were needed in the <strong>health</strong> care sector. At the same time, attention<br />

was paid to maintaining <strong>and</strong> enhancing financial protection mechanisms for<br />

<strong>economic</strong>ally vulnerable groups.

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