Belgium’s public finances: a missed opportunity
The desk views Belgium's ongoing budgetary stalemate as a critical risk to fiscal credibility, particularly with the looming 2029 elections. Per the full note from ING, the government is grappling with a €10 billion savings package that remains unresolved, potentially undermining public trust. The delay in reaching an agreement, especially on significant reforms such as a VAT increase, is a source of concern that could impact investor sentiment towards the euro. The absence of any imminent calendar catalysts means the market will have to closely monitor political developments in Belgium moving forward.
What the desk is arguing
The desk contends that Belgium's failure to finalize its budget is a significant threat to its fiscal credibility. Any continued delay in negotiations not only risks financial stability but could also affect the government’s ability to implement necessary reforms, as highlighted by ING's analysis.
With the negotiations pushing to secure agreements for the 2027 budget, which includes €4 billion in savings, the postponement of the general policy statement underscores the precarious position of the government's financial planning. As October draws to a close, the window for swift resolutions is narrowing, increasing the likelihood of reliance on provisional budget measures, which could hamper public services and investor confidence.
Where it sits in our coverage
Currently, our consensus target for the EUR/USD stands at 1.075, with a range from 1.04 to 1.12. Leading forecasts include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This outlook suggests that our desk's positioning anticipates heightened volatility, potentially at the lower end of expectations if political uncertainty persists.
How other firms see it
Aligned firms like jpmorgan foresee a stable euro with appropriate adjustments to fiscal policy, while bofa takes a more pessimistic view, suggesting that ongoing fiscal indecisiveness could drive the euro lower against key currencies.
One should watch the EUR/USD rate closely, as its movements will likely reflect the political developments surrounding Belgium's budget negotiations and broader EU fiscal policies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Belgium's budget negotiations are a critical point of uncertainty.
- 02The failure to agree on savings risks public trust and fiscal credibility.
- 03A delayed budget could lead to reliance on provisional measures.
- 04Political developments will be closely monitored by investors.
Market implications
Watch for fluctuations in the EUR/USD as developments in Belgium's political landscape unfold. A breakthrough in budget talks could provide a temporary lift to the euro, while continued delays could lead to downward pressure. Investors should remain alert to signals of further delays past the October deadline.
Risks to this view
Should the Belgian government reach an agreement on the budget, or if there is a sudden political shift that reassures investors, this could reverse current bearish sentiment. A rapid resolution to the fiscal stalemate could lead to a re-rating of euro expectations and re-establish a stronger trajectory for the currency.
Articles Belgium’s public finances: a missed opportunity Published 14:15 Belgium Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Belgium’s current failure to agree on a three-year €10bn savings package is not yet a political crisis, but it is a missed opportunity. A deal on the 2027 budget remains possible, yet delaying the harder choices risks weakening the country’s fiscal credibility as the 2029 elections draw closer Philippe Ledent Belgian PM Bart De Wever This was supposed to be a decisive week for Belgium’s public finances. The prime minister was due to deliver his general policy statement to parliament on Tuesday, outlining a budget agreement among the governing parties for the next three years, up to the 2029 elections.
In addition to measures already adopted, the government is seeking €10bn in recurring savings, phased in over the next three years. A new timetable for negotiations For now, however, the budget talks have failed to produce an agreement. A central element of the package was a one-percentage-point increase in the standard VAT rate, from 21% to 22%, but one coalition party firmly opposed the proposal.
The general policy statement therefore had to be postponed. Under Prime Minister Bart De Wever's revised timetable, the immediate priority is to secure agreement on the 2027 budget, including €4bn in savings. Ideally, a deal would be reached by the end of October, allowing parliament to debate and approve the legislation before year-end.
This would avoid recourse to the system of provisional twelfths, under which the previous year’s budget is rolled over on a monthly basis to keep public services running. The PM has made clear that he wants to avoid such an outcome at all costs. He is even prepared to push through legislation that would trigger automatic spending cuts of €3-4bn from January 2027 if no budget is agreed by year-end.
In a second phase, negotiations are expected to resume with the aim of finding a further €6bn in savings across the 2028 and 2029 budgets. This stage will be crucial for Belgium’s medium-term fiscal trajectory. Postponing those discussions until next year is a risk.
By then, the federal and regional elections scheduled for spring 2029 would be closer, and the wide political differences within the current coalition would make agreement on additional measures more difficult. A chance to stand apart from France There is no political crisis at this stage. With a package of measures, Belgium should still be able to adopt a 2027 budget that brings the deficit below 5% of GDP.
Even so, failure to reach a swift and comprehensive agreement on the full €10bn package is a missed opportunity for the federal government to show financial markets that Belgium is not France. On headline indicators – public deficits, debt and even economic growth – little separates the two countries. France’s difficulty, however, lies in its inability to set and pass a budget, compounded by the political uncertainty surrounding the April 2027 presidential election.
Belgium, by contrast, has a governing majority capable of approving a budget and pursuing structural reforms, as it has demonstrated since 2025. A three-year agreement would have sent a powerful signal that the country’s public finances were being placed on a more sustainable path. For now, that opportunity has been missed, though we still believe some less ambitious agreement is likely in the coming weeks.
Public finances Belgium Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Philippe Ledent Senior Economist, Belgium, Luxembourg Philippe Ledent is a Senior Economist at ING Belgium.
He’s responsible for economic scenario and structural research on Belgium and Luxembourg. Philippe also teaches in French and Belgian… In this article A new timetable for negotiations A chance to stand apart from France
Sources & References
How we cover this story