Belgium’s federal coalition has been forced to scale back its ambitions, focusing on a more limited set of savings for the coming year after failing to reach a comprehensive multi-year deal to close a roughly €10 billion gap by 2029.
Prime Minister Bart De Wever (New Flemish Alliance, N-VA) is now focusing on a more limited package for 2027, targeting savings of around €3 billion to €4 billion and dropping the contested VAT reform that had blocked progress. He put the revised proposal to his vice-premiers on October 14 and wants a first block of about €4 billion agreed within days.
A novel idea would be the introduction of a “debt brake”, a mechanism to freeze government spending during emergencies, to avoid fiscal problems. It would be activated through parliament if no deal covering the years to 2029 is struck before the end of December.
He has already been forced to cancel the planned State of the Union address on October 13 after negotiations within the five-party Arizona coalition stalled.
Disagreements centre on VAT reform, healthcare spending and the balance between new taxes and structural cuts. The original target was to save €10 billion, but parties were unable to compromise.
De Wever has warned that parties unwilling to abandon “taboos” risk higher debt that can no longer be managed without significant loss of prosperity.
The French-speaking Liberal Reformist Movement (MR) has strongly opposed higher VAT and was willing to go all the way to block it. Its leader Georges-Louis Bouchez says raising taxes is not a reform. The N-VA still wants the standard rate lifted from 21 per cent to 22 per cent.
A provisional budget based on provisional twelfths has been ruled out as an acceptable outcome given market conditions. Belgium began 2026 under that arrangement, which caps monthly spending at one-twelfth of the previous year’s total. The budget must reach parliament in early November to avoid a repeat.
The underlying fiscal position is strained. The general government deficit reached 5.2 per cent of GDP in 2025, or €33.2 billion, with debt at around 108 per cent of GDP and still rising, up from 103.9 per cent a year earlier, according to the National Bank of Belgium.
On unchanged policy, the Federal Planning Bureau and Monitoring Committee project the overall deficit rising to roughly 5.7 per cent by 2029 and above 6 per cent by 2031 (€48.5 billion), driven by rising interest costs, ageing-related spending and the expiry of temporary measures. The Planning Bureau expects the debt ratio to reach 117 per cent in 2029 and 122 per cent in 2031.
Belgium is subject to the EU’s Excessive Deficit Procedure and is expected to bring the deficit below 3 per cent by 2029, a deadline set by the Council of the European Union in June 2025.
Interest costs are increasing as maturing debt is refinanced at higher rates. They reached €14.3 billion, or 2.2 per cent of GDP, in 2025, a fourth consecutive annual rise.
The National Bank of Belgium and the Debt Agency have warned that an interest-driven “snowball” effect, where the state must borrow simply to service existing debt, could begin as early as 2028 or 2029, two years earlier than previously projected. Debt Agency director Jean Deboutte told ministers a further rise in rates would pull it forward to 2028. Interest expenditure is now forecast to reach about €20.4 billion by 2029.
Regional differences complicate the picture. Wallonia and the French Community face elevated risks of unsustainable debt trajectories, according to the Federal Planning Bureau.
Wallonia’s deficit has exceeded €2 billion, widening to €2.9 billion in 2025 from €2 billion a year earlier, with direct debt of €40.8 billion. The current Walloon government presented a 2027 budget on October 12 showing a deficit of €1.35 billion, as part of a multi-year path toward balance by 2029, but the region’s higher social spending and weaker growth continue to weigh on overall public finances. The French Community has forecast a deficit of €1.27 billion for 2027.
Flanders has set a clearer consolidation path. Its government agreed on September 29 to save €1.9 billion in 2027, rising to €3.1 billion by 2029.
Belgium already operates one of the highest tax burdens in the OECD. The overall tax-to-GDP ratio stood at 42.6 per cent in 2024, fifth-highest among member countries**, behind Denmark, France, Austria and Italy**. The tax wedge on labour for a single average earner remains the highest in the OECD, at roughly 52.5 per cent**, against an average of 35.1 per cent**.
Critics of further revenue measures argue that the state is already expensive relative to peers, while proponents of deeper cuts point to the difficulty of generating large additional revenues without growth or efficiency gains.
Financial markets have added pressure. Long-term rates have risen, increasing refinancing costs. The average yield on 10-year Belgian bonds was 4.35 per cent at the end of September, 85 basis points above its level at the start of the year.
Rating agencies continue to monitor the trajectory. Moody’s cut Belgium to A1 from Aa3 on April 17 and affirmed that rating on October 10, but projects further debt increases unless credible consolidation is delivered.
Ageing and debt make Italy, France and Belgium the weak links of Europe, according to the latest study published by the National Bank of Belgium. https://t.co/Z0NdMslAkt
— Brussels Signal (@brusselssignal) November 13, 2025
