King asks Belgium's coalition to keep talking as deficit looms

What happened this week

Belgium sidestepped a government collapse after King Philippe asked Bart De Wever's coalition to keep working on a budget to shore up strained public finances. The Royal Palace said the king and the prime minister met in Brussels and will sit down again on Nov. 16.

In that statement, the palace noted, "The king insisted on the necessity of finding a fair balance between preserving social cohesion and stimulating economic growth." Earlier in the week, De Wever had put his resignation on the table, and the king paused any decision while he met party leaders across the five-party alliance.

The budget fight and where it stands

The coalition has missed a string of budget deadlines during contentious talks on how to rein in one of the euro area's largest deficits. Parties remain split on the mix of spending cuts and new tax revenue, even as De Wever warned that failing to fix the shortfall could unsettle investors.

Belgium's fiscal picture has worsened. In 2025, the deficit reached 5.2% of gross domestic product - the top figure in the currency bloc - and the central bank projects it will expand to 5.7% in 2028. Credit quality has slipped too, with two downgrades this year after two last year.

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The political backdrop

De Wever has led the so called Arizona government since 2025, a nickname tied to colors associated with the Arizona state flag. He heads a Flemish nationalist party that ultimately favors breaking up the Belgian state, which makes his leadership notable in a country where coalitions are the norm.

His standing for execution improved when he opposed an EU proposal to tap frozen Russian central bank assets held at Brussels based Euroclear to finance Ukraine. Belgium's 11 million people live with long running cultural and linguistic divides, and fractious coalitions are a recurring feature.

Why investors should care

Bond markets are alert to the risk. Investors now demand more than 100 basis points over Germany for Belgium's 10 year bonds, a gap tied to concern about the nation's public finances and to spillovers linked to France's nearby fiscal and political troubles. The coalition crisis also touches policy. This week, officials also pushed back deadlines on two key files - selling a portion of Belfius Bank and securing a deal to acquire Engie's nuclear assets.

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