Belgium as a small open economy in the core of Europe

Small open economies in Europe share many of the same characteristics, policy choices and economic problems. This paper argues that Belgium is profoundly affected by its position as a small open economy in the core of the European Union. Yet, this European dimension does not prevent that even a small open economy as Belgium takes policy decisions with far-reaching consequences. The Belgian experience also provides several interesting insights for other small European countries and for the European integration process as a whole. In this context, particular attention is paid to (1) the consequences of a fixed exchange rate policy, (2) the interdependence between exchange rate stabilization, income policy and international competitiveness, (3) budgetary discipline in the run-up to European Monetary Union, (4) long-run international trade specialization, (5) labor market performance and (6) Belgian federalism.