236 days after the June 2024 election, a new federal government coalition has finally been formed in Belgium, the country that still holds the world record of 652 days without a full-fledged government. Forming Belgian federal coalitions has been challenging in the last two decades due to profound ideological differences between political parties from Dutch-speaking Flanders and Francophone parties from Wallonia and the capital region of Brussels, which is officially bilingual.
Traditionally, Flemings tend to vote for rightwing parties, in support of lower taxation and tougher crime and migration policy. In June 2024, however, the right wing gained ground also in Francophone Belgium. In a surprise to pollsters, the left-wing parties —socialists, communists, and greens—suffered a collective defeat. George-Louis Bouchez, the leader of the centre-right Francophone liberals, managed to become the dominant political force and concluded a regional Walloon coalition with the centrist party Les Engages, thereby also committing to joining a federal coalition together.
In Flanders, the centre-right N-VA, led by Antwerp mayor Bart De Wever, equally surprised pollsters by managing to remain the biggest Flemish party ahead of the right-wing populist Vlaams Belang, kept out of government with a cordon sanitaire imposed by all other political parties.
De Wever’s Flemish centre-right nationalist N-VA is now governing in coalition with Francophone liberals and centrists, as well as Flemish Christian democrats and social democrats, The arrangement has been dubbed an “Arizona” coalition, mirroring the colors of the flag of the American state: yellow for N-VA, orange for Christian democrats, red for socialists, and blue for Francophone liberals and centrists.
In the new federal government program negotiated by Prime Minister De Wever, there is little emphasis on strengthening Flemish self-government, despite the N-VA’s nationalist roots, aiming for Belgium’s gradual dissolution. De Wever once quipped, “From treason to treason, we achieve Flemish statehood,” mocking those in Flemish nationalist circles who view any concession as unacceptable.
During the election campaign, De Wever emphasized that consolidating Belgium’s public finances should be the top priority for the Flemish region, which accounts for about 80% of Belgian exports with only 60% of the population. The outgoing federal government, dominated by socialists and greens, left a massive budget hole, along with other irresponsible policies, such as the closure of perfectly functional nuclear power plants, despite the 2022 energy crisis.
The new government programme includes a number of measures that should help consolidate the budget. All in all, the reforms are quite modest, given how a majority was only possible by including the Flemish socialist party and the left-leaning Flemish Christian Democrats. A key measure is that citizens will need to work slightly longer before being able to enjoy a full state pension. Belgian taxes on salaries—the highest in the world—will be slightly reduced. The centre-right parties had to concede the introduction of a general capital gains tax—pretty much the only tax that did not yet exist in the world’s most heavily taxed country. Furthermore, it will no longer be possible to enjoy unemployment benefits indefinitely. Belgium was one of the only countries in the world offering this arrangement.
The hope is that these measures will drastically reduce the high number of working-age people who are currently not employed. This is a challenge especially in the Francophone part of the country, something De Wever has cited to argue that at least some of his policies align with his regionalist beliefs. He is not wrong. Without the Francophone socialist party—which has been blocking these sensible reforms for years—it has now become possible to introduce these measures.
When it comes to immigration policy, Belgium is about to tighten things up by no longer providing private housing to asylum seekers, but instead collective reception centers. Asylum seekers who have already been rejected by another EU country won’t be able to enjoy housing if there is a shortage. Family reunification will be limited by increasing the income threshold and requiring a language and citizenship test. The new government will also explore sending illegal immigrants who commit crimes to serve their sentences in prisons abroad. Notably, it will also unify the six police zones in Brussels into a single one, against the resistance of the 19 Brussels mayors, who are wary of losing power.
Observers are skeptical whether these policies will suffice to plug Belgium’s budget deficit, which, at almost 5%, is among the biggest in the Western world. In any case, PM De Wever still wants Belgium to become a “confederation.” Before the 2024 election, he even stated that if this worked well, to him, Flemish independence was no longer necessary. The government agreement includes little in this area, only committing to ongoing exploration of institutional reforms. A two-thirds majority in the Belgian Lower House is required to pass such reforms, but financial pressure could potentially help achieve these numbers over time.
The Brussels region, which is struggling to form a new government, has a whopping 40 percent budget deficit. State-owned bank Belfius has warned the Walloon region it may cease refinancing, having already refused to finance several Walloon cities. The Flemish region, meanwhile, seems to be swimming in cash, as it is able to spend a massive €18 billion on subsidies.
As a consequence, consolidating the fiscal situation of Belgium’s federal and regional policy levels most likely requires large-scale institutional reform.
The obvious solution would be to transfer competences like health care and pensions from the federal level to the regional entities—this is more or less the case in Spain and Germany—without fully transferring the budgets for this. Something along these lines already happened with the sixth big institutional reform in Belgium, passed fifteen years ago, but only for a select number of competences.
If repeated on a large scale, the Flemish government would be forced to cut subsidies in order to finance its newly acquired competences. The already virtually bankrupt Francophone regional entities would then get new resources to pay for their new competences, dependent on implementing an—IMF or the euro zone Troika style—adjustment programme. It is not hard to see why Belgium’s political class is keen to postpone something like this for as long as possible, but at some point, the pressure may become too big.
Ideally, at the heart of future Belgian institutional reform would be to grant every policy level the taxation power required to finance whatever is within its competences. This would send the right incentives throughout the system, as politicians would know that every spending decision will also carry a requirement to impose taxes. The great model for this is Switzerland. In no other country, decentralised entities enjoy more taxing power than over there. In countries where decentralisation is only a sham, such as the UK, decentralised policy levels are mainly allowed to spend money they get from the central authority. Typically, the central authority resists giving up taxation power.
