A deadlock and a cancelled speech

Budget talks in Belgium's federal government have reached a deadlock, and Prime Minister Bart De Wever has had to cancel his State of the Union speech to Parliament, which was planned for Tuesday 13 October. The coalition of the N-VA, MR, CD&V, Les Engagés and Vooruit has not agreed on how to find 10 billion euros. The budget deadline has been moved to late October, or early November at the latest. Total interest payments now stand at 16.7 billion euros, more than the defence budget, after about 2 billion euros in extra interest since the previous budget crisis. Without an agreed budget, the country would fall back on provisional twelfths, a mechanism under which the administration may spend each month only one twelfth of the credits from the previous year. Belgium also began 2026 under provisional twelfths because no full budget was agreed then either.

The VAT dispute at the centre

The main obstacle is the MR's refusal of a VAT increase, which its chairman Georges-Louis Bouchez has opposed for months, arguing that higher VAT cuts household purchasing power. CD&V president Sammy Mahdi accused the MR of trying to rule out topics in advance, saying no party can do that if the negotiations are to produce anything. Rachel Crivellaro argues that the MR is serving as a scapegoat, and that partners reluctant to pursue other revenue measures are hiding behind its refusal. She estimates that a VAT increase could bring in about 2 billion euros of the 10 billion sought.

Savings sought10

Estimated yield of a VAT increase2

Savings sought

10 billion euros

Estimated yield of a VAT increase

2 billion euros

Data from the article text

Economist Selien De Schryder of Ghent University says the effect is more nuanced, because Belgium has automatic wage indexation that passes higher prices on to wages with a delay. She adds that if companies do not raise prices by the full amount of the VAT rise, their profit margins fall, and that such worries fit a liberal party like the MR. A source in the talks says De Wever's latest proposal would still ask the MR to absorb a 1.5 billion euro effort, possibly by raising the VAT rate from 21 to 22 percent, with nothing returned through the planned payroll tax cut.

Partners trade blame

Dorian de Meeûs, editor-in-chief of La Libre, argues that other parties, including Vooruit, are also blocking a deal. He says the Flemish socialists refuse to negotiate on health care and social security, a budget he puts at 120 to 140 billion euros. He also faults De Wever for putting the same proposals back on the table even though he knows they are hard to negotiate. Vooruit sources say defence spending cannot be cut, a tax on the wealthy is off the table, and the management companies should barely be touched. CD&V holds firmly to the payroll tax cut and is unhappy that De Wever's latest proposal moves the weight of the operation further back.

What comes next

A government statement issued on Sunday evening, 11 October, from the Prime Minister's office at 16 rue de la Loi, said a scenario of provisional twelfths is not an option and that the prime minister will not accept it. Negotiators still speak of a solution by the end of October, with one saying two to three weeks of work remain. De Wever is expected at a European summit on Thursday 15 October, and before then he plans new contacts with his vice-premiers. A source expects an offensive move, such as bringing the MR chairman to the table or summoning all vice-premiers to a castle. Earlier in October De Wever said the country can handle at most one more savings round before a seventh state reform is needed. PS chairman Paul Magnette doubts that call, rules out a seventh state reform, and sees De Wever anticipating the failure of the budget talks. Discontent among French-speaking secondary school pupils also continues.