Economist.com Cities Guide: Brussels Briefing - June 2006

News this month

The next big thing

The bid by the New York Stock Exchange (NYSE) for Euronext, a European exchange operator, has captured plenty of interest in Brussels, among both financial traders and European Union regulators. The American bid, approved by Euronext's managers on June 1st, marks the latest stage in the evolution of the Brussels exchange-the city's bourse was merged with that of Paris and Amsterdam in 2000 to form Euronext (Lisbon's exchange was added in 2002). If the €8 billion ($10 billion) deal goes through, the merger would make the Brussels bourse part of the first transatlantic exchange to offer equities, options and futures for up to 12 hours each day.

Though Euronext's managers accepted the American offer, Deutsche Börse, a Frankfurt-based exchange, has continued with its own takeover bid, and any deal must still be approved by Euronext's shareholders and EU regulators. The president of the European Central Bank, Jean-Claude Trichet, has said that he would prefer a consolidation of European exchanges over a transatlantic takeover. Other European regulators have voiced fears that a deal with the NYSE might export American regulation to Europe and slow the integration of Europe's financial markets.

Beauty is in the eye of the investor

It seems that Belgium is getting better at wooing foreign investors, according to an annual study by Ernst & Young, an accounting firm. In its "Barometer of Belgian Attractiveness" report, published on June 7th, the firm compared the country's foreign investment levels with those of its European competitors, and saw Belgium climb in the rankings, from ninth place to fourth, behind Britain, France and Germany.

Still, the report's authors stressed that there is plenty of room for improvement. Investment is not distributed evenly through Belgium's regions: in 2005 61% of investment went to Flanders, 18% to Brussels and only 21% to Wallonia. Ernst & Young also argued that the country needs to increase investment in infrastructure, particularly at Zaventem, the national airport, and attract more investors for new projects, rather than mere expansions. Meanwhile high labour costs-driven by taxes to fund Belgium's bloated social security and welfare systems-continue to dissuade foreigners from investing in labour-intensive projects, particularly in the manufacturing and pharmaceutical industries. Investors prefer capital-intensive projects (eg, an oil-refining plant), so the average foreign-investment project in Belgium produces 47 new jobs, less than half the European average of 95.

Opening the door, slowly

The EU's four freedoms-the free movement of people, services, goods and capital-have yet to be fully realised, particularly for citizens of some of the newest EU member states. But on June 1st Belgium took a small step towards fulfilling one freedom by easing restrictions on workers from states that recently joined the EU. In May 2004, when the EU was enlarged to include eight countries in central and eastern Europe, plus Cyprus and Malta, only Britain, Ireland and Sweden immediately opened their labour markets to workers from the new member countries. Belgium agreed to admit only some workers from Cyprus and Malta.

Now Belgium, particularly in the northern region of Flanders, is faced with a need for both skilled and unskilled workers-a situation some economists blame on the country's generous welfare system, which dissuades some Belgians from re-entering the workforce. To deal with this problem, Belgium has partially opened its labour market to all ten new EU members. Officials in each of Belgium's regions have given the federal government lists of the industries most in need of new labour. Employers in those industries, if unable to find a Belgian to fill a job, may hire a worker from any of the EU's member states. To ease this process, paperwork for work permits has been simplified, so that a permit can now be obtained in only five days, compared with weeks or months under the prior system.

Border politics

Belgians are up in arms about plans that would move some cannabis shops in the Netherlands closer to Belgium. Gerd Leers, the mayor of the Dutch town of Maastricht, has proposed moving seven of the town's 15 cannabis-selling "coffee shops" to its Belgian and German borders. The shops are a magnet for visitors who want to buy drugs that are illegal in their own countries. Mr Leers is eager to move some of these 1.5m yearly drug tourists out of the town centre to a designated area near the border, where he claims authorities will be able to monitor activity more easily, and crack down on illegal shops and the sale of harder drugs.

But the Belgian towns near Maastricht, notably Lanaken and Voeren, do not want the drug tourists coming any closer. The plan has drawn the ire of Belgium's top officials, including the prime minister, Guy Verhofstadt, who wrote an angry letter at the end of May to his counterpart in the Netherlands, Jan Peter Balkenende. Belgian leaders argue that Mr Leers's plan would violate the Schengen Treaty, a border agreement among European countries that, among other things, requires that one country's drugs policy does not create problems or illegal trade in another country.

Je ne parle pas néerlandais

Tension between Belgium's prosperous, Dutch-speaking north and struggling francophone south may be reinforced by a growing language barrier. According to a report published in mid-June, the linguistic ability of Belgian's southern francophones lags far behind that of their northern Dutch-speaking compatriots. Among the residents of French-speaking Wallonia, only 17% can speak both French and Dutch, and 7% speak French, Dutch and English. By contrast, 57% of Flemings speak both French and Dutch and 40% describe themselves as trilingual. Residents of Brussels, where both French and Dutch are officially used, were excluded from the study.

The study, conducted by researchers from the Université Libre de Bruxelles, has given weight to a plan to spend more on language training in Wallonia. The government's prescription for Wallonia's economic revival, which it refers to as a Marshall Plan, includes allocating €60m for language studies.

Catch if you can

June 2006

Couleur Café music festival

June 30th-July 2nd 2006

Tracy Chapman, James Brown, Brazil's Gilberto Gil and Spain's Amparanoia are among the musicians lined up to appear at the Couleur Café festival. What started in 1990 as a world music event has kept its core-witness the presence of Mali's Toumani Diabaté and Anikulapo Kuti. But having extended its range to include genres such as hip hop and electronica, the programme now defies classification. This unusual urban music event takes place in the Tour & Taxis, an old industrial depot.

Tour & Taxis, 3 Rue Picardstraat. Tickets available online or through agencies listed on the website.

More from the Brussels cultural calendar