June 24 (Bloomberg) -- The European Union said Belgium’s deficit-cutting plan lacks “crucial information” and told the government to submit a new budget strategy by Sept. 20.

“The absence of crucial information in the program, such as the expenditure and revenue ratios, has hampered the possibility to assess the credibility of the deficit and debt targets,” the European Commission, the EU’s executive in Brussels, said in a report today. “The program does not present a medium-term budget strategy in the sense of the Stability and Growth Pact,” which includes the bloc’s deficit rules.

The nation’s budget deficit, which amounted to 1.2 percent of gross domestic product last year as the recession took hold and the country enacted measures to stimulate the economy, may reach 5.5 percent of GDP in 2009 and 6 percent next year, according to projections by the National Bank of Belgium. EU rules set a deficit ceiling of 3 percent of GDP.

Belgium’s “deficit and debt targets are subject to considerable downside risk,” the commission said. “The program lacks ambition regarding the decisive correction of the deficit as the economic situation improves,” according to the report.

“It is normal we need to have a new stability program in September,” Belgian Finance Minister Didier Reynders said in an interview in Paris today, adding that budget discussions must wait for the new regional government. “We are waiting for the new government maybe at the middle of July and if it is possible to have that we will have a new stability program in September,” he said.

Fiscal Policies

“The best thing to do, without having a too restrictive impact on the economy, would be to increase efficiency of the public sector and limit health-care spending,” said Philippe Ledent, an economist at ING Groep NV in Brussels. “But budget discussions are in the fall; I don’t see how they could decide all the measures before Sept. 20.”

The commission said Belgium should reverse its expansionary fiscal policies starting in 2010, when the economy is expected to improve. Prime Minister Herman Van Rompuy’s government should adopt a “more stringent budgetary framework” and “undertake structural reforms of the social-security system, the labor market and product markets to enhance potential growth,” according to the report.

Governments across the 27-member EU stepped up spending to support financial institutions and tackle the worst recession since the World War II, swelling budget deficits and public debt. Deficits in the region will average 6 percent of GDP this year, twice the bloc’s limit and up from 2.3 percent last year, the EU forecasts.

EU Limit

The commission issued deficit reports on eight other EU nations today, including Austria, Slovenia, Slovakia and Malta in the euro region. Austria was told to reverse its stimulus measures once the economic crisis subsides in order to bring its deficit back under 3 percent of GDP by 2012.

Austria’s budget shortfall will breach the EU limit this year and next on falling tax revenue and higher spending on unemployment benefits. The deficit will hit 3.5 percent of GDP this year and 4.7 percent in 2010, according to Finance Minister Josef Proell’s address to the parliament in Vienna on April 21.

Malta was told to bring its deficit back under the 3 percent ceiling by the end of 2010, while Slovenia and Slovakia must start reversing their fiscal-stimulus measures next year, according to today’s report. The commission set a 2011 deadline for Hungary, Lithuania and Romania to rein in their deficits and gave Poland until 2012.

EU finance ministers are expected to discuss the commission’s report at a meeting in early July in Brussels. Governments will have six months from then to start implementing measures to bring their deficits back in line with EU rules.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net

Last Updated: June 24, 2009 10:04 EDT