Rising Interest Rates Complicate Belgium’s Budget Consolidation
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Rising Interest Rates Complicate Belgium's Budget Consolidation
- Belgium's government, led by Prime Minister Bart De Wever, faces a challenging task to find €10 billion in budget savings by 2030, as rising interest rates exacerbate the country's already significant public debt and deficit.
- In 2024, Belgium recorded a budget deficit of 4.4% of GDP and a debt-to-GDP ratio of 103.9%, figures that are projected to worsen in the coming years without substantial reforms.
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Belgium is grappling with a substantial budget deficit and a high national debt, making a planned €10 billion budget consolidation by Prime Minister Bart De Wever’s government increasingly difficult. The country’s budget deficit reached 4.4% of GDP in 2024, with public debt at 103.9% of GDP in the same year, both exceeding the European Union’s thresholds of 3% and 60% respectively. This has led the EU to initiate an excessive deficit procedure, requiring Belgium to reduce its deficit by 2029.
Rising interest rates are a significant factor intensifying the pressure on Belgium’s public finances. The average interest rate on Belgium’s public debt is gradually increasing as older, lower-interest loans mature and are refinanced at higher rates. This trend is expected to cause annual interest expenditure to rise from approximately 1.8% of GDP in 2023 to 3.6% of GDP by 2032. The National Bank of Belgium has warned that if the average interest rate on government debt surpasses nominal GDP growth, a “snowball effect” could rapidly increase the debt-to-GDP ratio.
The government’s efforts to implement austerity measures have faced challenges, including protests against social spending cuts. Despite reforms in 2025 that aimed to halve long-term aging-related costs, the projected trajectory of public debt remains a concern. Prime Minister De Wever, who took office in February 2025, has emphasized the critical need for reforms to liberalize the labor market, curb unemployment benefits, and reduce pension costs. A budget agreement reached in November 2025 outlined €9.2 billion in savings until 2029, including increased excise duties and efforts to bring more people back into the workforce. However, the European Commission projects that Belgium’s deficit could still reach 5.9% by 2027 if policies remain unchanged.