Liege is bankrupt, but most residents hardly notice

The city of Liege is bankrupt. Belgium's third-largest city has $800 million in unpaid bills which it can't pay because its credit rating has fallen so low it can't borrow on capital markets anymore.

But, except for city employees like Claude Troonbeeckx, a fireman who has seen his weekly pay cut to $50, Liege's problems don't seem to make much difference to residents there.

For most, the city's going bust is a matter of certain inconveniences. A municipal strike has left garbage piled in the streets. Town hall has been closed to the public. Buses have been idle. And police and firemen have answered only emergency calls.

In mid-May, Liege stopped paying its employees their wages and asked the national government to bail it out. Except for an emergency loan, which was shelled out to pay Claude Troonbeeckx and his fellow city employees $50 a week, the Belgian government refused to help.

On July 4, to protest the city's budget-handling incompetence, Troonbeeckx and 15 other city workers went on a hunger strike that they vowed would last until there was light at the end of Liege's financial tunnel.

On July 19, the hunger-strikers ended their fast when the city council approved an austerity package that includes a three-year wage freeze and a 50 -percent hike in local taxes. A week later, the Belgian government stepped in with an $18 million gift to pay the city employees their wages for June and July. It also promised further help if the city sticks to its austerity plan.

But the government's gift does not mean the city's problems are coming to an end. Liege has no hope of repaying its huge debt, and with the repayment burden absorbing nearly one-third of the city's budget, it will have troubles for some time to come. The depressed coal and steel industries on which much of the city's livelihood depends also show no signs of recovering soon.

Observers attribute Liege's troubles to financial mismanagement, constitutional shortcomings, and world recession.

For years, the city has lived well beyond its means, shelling out, for example, twice as much money in salaries for public servants as towns of comparable size (230,000 residents) have done and supporting a cultural life that shames the country's capital. It has an opera, a philharmonic orchestra, and no fewer than 18 museums.

The national government gives Belgium's cities great freedom in deciding the scale of their capital spending. This led to Liege overborrowing so extensively it was frozen out of the capital markets in 1981.

In many other West European countries, it is illegal for cities to budget for a deficit. If spending looks as if it will be higher than revenue, the city must boost local taxes. But Liege has been in the red for 150 years.

Liege had borrowed heavily in the 1960s and early '70s. Then - beginning in 1973 - came a world recession that forced interest rates sky-high. Hundreds of companies went bankrupt just because the city failed to pay them for more than a year.

But Liege is not alone. Economists warn that what has happened to it is happening to cities throughout Belgium.

No fewer than 527 of Belgium's 586 municipalities are running budget deficits totaling some $7.5 billion. The country's fourth-largest city, Antwerp (population 197,000), has said it will probably have to default on its $500 million debt and will not be able to pay its employees beginning this month unless the government guarantees an immediate loan of $260 million.

The national government, which is itself in rough financial shape, can do little more than toss out an occasional emergency grant to help the cities. Government officials accuse the cities - especially Liege - of poor management, paying too many public employees too much money.

For their part, city officials accuse the national government of reneging on promises to help them financially, and of loading on them extra responsibilities without providing the means to pay for them.

Meanwhile, life goes on. A record number of holidaymakers have gone abroad this summer for their annual vacation. There is still no poverty in the country. There is money to be made - and spent.

Belgium's cities may be in debt. But the country is not. ''You have your American way of life,'' a government official said. ''Being in debt is ours.''

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