European summit - GSK: De Wever believes the pharmaceutical sector must be protected from the US and China

Belgium's Prime Minister Bart De Wever has proposed freezing all government spending and indexing mechanisms for 2027, according to multiple sources. This proposal does not constitute a formal budget for 2027 but includes an emergency mechanism intended to signal financial markets if public finances deteriorate. If agreed upon within the governing coalition, this mechanism would be incorporated into a legislative bill before being submitted to Parliament for approval. The freeze would prevent further deficit expansion in 2027 by halting all state expenditures for one year. Any additional funding requests from different departments would be prioritized vertically, effectively blocking new policies. Additionally, all indexing measures that cost the state, such as social benefits, unemployment payments, pensions, civil servant salaries, and tax brackets, would be suspended for a year. This approach would impose a strict regime on the state while continuing efforts to secure agreements on reforms, including a potential reduction in the value-added tax (VAT), which could generate around €10 billion. According to sources, the advantage of this alternative proposal is that it avoids reliance on provisional budgets for 2027, which De Wever views as a serious threat, potentially leading him to resign. It also allows bypassing the immediate issue of the MR party’s refusal to accept a VAT increase, which would bring approximately €2 billion into the state coffers. This radical alternative appears to be a high-stakes gamble for De Wever. It is unlikely that all members of the governing coalition would agree to such a drastic measure. Some parties have remained largely silent on the proposal, indicating discomfort with its implications. De Wever’s strategy seems aimed at prompting resistance from the coalition, forcing them to confront the urgency of the fiscal situation, rising interest rates, and anticipated snowball effects. A more conventional multi-year budget would then return to the table. Either everyone would compromise, or vetoes would remain in place. De Wever would then draw his conclusions accordingly, though he might claim he tried everything before stepping down. Separately, De Wever emphasized the need to protect Belgium’s pharmaceutical sector during a European summit. He highlighted the challenges faced by the British pharmaceutical giant GSK due to U.S. and Chinese pressures. The U.S. president has compelled GSK to invest heavily in the United States and has resisted importing vaccines, putting companies like GSK under strain. Meanwhile, China's practices in clinical trials are viewed as unfair competition, heavily subsidized and undermining even innovative firms. De Wever argued that protecting the European market is essential, emphasizing the need for an integrated market to ensure effective protection against protectionist pitfalls. He noted that the European sentiment has shifted since Germany changed its stance toward China, sending a letter with France requesting a stricter EU trade policy toward Beijing. GSK, a global leader in pharmaceuticals with nearly 70,000 employees, has announced plans for restructuring that could affect up to 1,217 jobs across its three Belgian sites. Despite its overall financial health, with a net profit doubling to €7 billion in 2025 on revenues nearing €40 billion, GSK faces strategic shifts. New CEO Luke Miels aims to boost revenue to €53 billion by 2031 through cost-cutting measures totaling €2 billion annually until 2029, driven by artificial intelligence, automation, and procedural simplifications. These savings are meant to fund aggressive research initiatives, including launching 25 advanced-phase clinical trials by year-end, over twice their previous target. More than half focus on oncology, with only one targeting a vaccine. This shift reflects concerns over expiring patents on key drugs, notably the HIV medication set to lose patent protection starting in 2028. Vaccines, deemed less profitable, are under scrutiny for cost reductions. GSK acknowledges declining performance in older vaccines like the flu shot, facing competition from newer technologies and smaller biotech firms. Production volumes have dropped by about 40% in five years, and post-pandemic uncertainties in the U.S. vaccination recommendations have added pressure. In Germany, GSK will close a vaccine production site, eliminating over 640 jobs, signaling a broader strategic realignment. Belgium holds a special position in GSK's history, hosting its largest global vaccine production site in Wavre, historic campus in Rixensart, and logistics hub in Gembloux. Around 8,500 workers are employed there, making GSK the largest private employer in Wallonia. Over 50% of GSK’s global vaccine output comes from these sites. However, workforce numbers have decreased from 9,107 in 2023 to 8,234 by July, a drop of 873 positions without a formal layoff plan. Despite reassurances from GSK management regarding continued investment and strategic importance of its Belgian sites, union representatives question whether commitments to U.S. investments, reportedly $30 billion over five years, might explain the restructuring. While GSK has not confirmed this, the U.S. accounts for more than half of its sales, compared to just 23% in Europe.