Indexation forms a major stumbling block to acceptance by the country's unions of the government's wages and conditions package, known as the inter-professional accord or IPA. The IPA puts a limit on wage rises of 0.3%, whereas the normal process of indexation would have taken account of inflation, which reached 3% in December.

But it is not only wage indexation that threatens the economy. "It's wage indexation that draws attention from the European Central Bank and other institutions," said Quaden, "but in Belgium there are lots of other indexation mechanisms that are less favourable for the population."

Electricity and gas prices are increased according to the consumer price index, while the prices themselves form part of the basket of goods and services that go tomakeuptheindex-a vicious circle that has seen prices here spiralling far beyond the heights reached in neighbouring countries like France, the Netherlands and Germany. Belgian families spend 11.2% of their income on energy costs, compared to the 9.6% average across Europe.

According to government forecasts, consumer prices will rise in 2011 by 2.7%, compared to 2.2% last year. The health index, meanwhile, will go up by 2.4%. Under normal circumstances, the trigger for a rise in public sector pay and pensions will come in June.

The fall-out from a fast-rising index also affects the private sector, which is faced not only with wage demands, but also ends up paying more for energy than their competitors in other countries (see table).

Insurance premiums are often linked to the index, as are the prices of train and bus tickets and rental costs, both for private accommodation as for offices and retail premises.

Electrabel under fire
Energy prices are a sore point in more ways than one, and critics have recently become more vocal in attacking the massive profits made by Electrabel and, to a lesser extent, SPE-Luminus. The two providers, critics point out, are free to set prices themselves - unlike in the Netherlands and France, where regulators can put a cap on price increases.

Ironically, Electrabel, which holds virtually a monopoly position on the Belgian market, is owned by GDF Suez, whose majority shareholder is the French state. The French government, it is said, has continually refused to accept the sort of price regulation in Belgium that it operates at home, threatening to withdraw Electrabel's headquarters out of Belgium altogether if Belgium insists, with the loss of thousands of jobs. SPE-Luminus, meanwhile, is owned by Electricité de France (EDF), which also has the French state as its majority shareholder.

There is also the question of the nuclear dividend - the profit that comes to the energy producers from exploitation of nuclear power stations that were written off by the government some years ago. Now, power companies can produce energy at very little cost and sell it at a price that never ceases to rise. The figures concerned vary: Electrabel itself puts the dividend at €652 million a year. The energy regulator CREG estimates somewhere between €2.07 billion and €2.28 billion. The unions, who take the position that some or all of this dividend ought to be reclaimed and funnelled into social projects, put the figure at €2.7 billion. The idea that something must be done about the nuclear dividend is, unusually, supported by the whole range of social partners, from the trade unions to the bosses' federation VBO.

One solution to the problem of indexation and energy prices would be to remove energy costs from the health index, thus breaking the vicious circle that exists at present, a proposal that Unizo, the organisation that represents small businesses, has said is "certainly open to discussion". The unions, on the other hand, consider such an idea "tinkering with the thermostat" instead of tackling the structural problem of the freedom of the energy providers to set their own prices.

Table: Inflation compared to price hikes

Country — Inflation — Gas price rise — Electricity price rise
Belgium — 3.4 — 20.4 — 6.0
Germany — 1.9 — 2.5 — 3.4
France — 2.0 — 13.8 — 3.1
Netherlands — 1.8 — 6.1 — -5.2

Source: National Bank