Belgium: PM De Wever warns of fiscal crisis amid budget deadlock

Belgian Prime Minister Bart De Wever has issued an urgent appeal to coalition partners to reach an agreement on the national budget, warning of ‘draconian measures’ from external sources if negotiations fail. The Prime Minister emphasized that partners must overcome political taboos to address the country's fiscal challenges.

Economic experts and officials from the National Bank and the Debt Agency have warned of a looming ‘interest rate snowball’ effect. This phenomenon occurs when interest costs rise faster than economic growth, creating a self-reinforcing cycle of debt. While previous projections suggested this spiral might begin by 2031, recent data indicates it could arrive as early as 2028 or 2029.

To prevent this cycle, the government must achieve a primary budget surplus where revenues exceed expenditures before interest is factored in. Failure to manage this could result in crucial tax revenues being diverted from public services to cover interest payments.