Belgium: Greens look poised to build coalition; economic reforms likely to be shelved
April 30, 2019
Five months after Prime Minister Charles Michel resigned following a no-confidence vote, Belgians will head to the polls on 26 May to elect a new government. Opinion polls suggest that his center-right government will struggle to hold onto power in the face of a groundswell of support for a patchwork of non-traditional parties, including the green parties. In the event of coalition talks, it appears likely that the greens—whose support is expected to jump amid the climate change-focused campaign—would emphasize climate policy and leave the previous government’s economic reforms on the backburner.
Given that economic policy has been largely absent from this year’s campaign (it has centered instead, almost exclusively, on climate policy), analysts have noted that the next government’s fiscal priorities are unlikely to deviate significantly from those of the Michel-led caretaker government. Moreover, seats lost by the traditional left-right parties will almost certainly be picked up by fringe parties at either end of the political spectrum, making compromise that much more difficult. To that effect, analysts expect the next government—opinion polls hint at a broad, disparate coalition—to agree on little, which would keep most significant economic reforms off the table.
Michel’s caretaker government, which has been operating since December on supplementary spending in lieu of a budget, is expected to remain in place through negotiations and until a coalition is agreed to—which, analysts argue, could take much of the year. That said, even once the next government is in place, analysts anticipate few changes to the public finances; short-term deficit forecasts have hovered near 1.2% of output for the better part of a year.
Commenting on the election’s plausible outcomes, Philippe Ledent, a senior economist at ING, notes that:
“The make-up of the next federal government remains very open. Given the fractured political landscape, it seems that the coalition will look like a patchwork of many parties. That could make it a bit more difficult to continue with structural reforms initiated by the previous center-right government. On the other hand, a stronger emphasis on climate measures looks likely, especially as the probability of the greens participating in the government has increased.”
Belgium GDP Forecast
Ahead of the vote on 26 May, which coincides with European Parliament elections, FocusEconomics analysts see growth at 1.3% in both 2019 and 2020—unchanged from last month’s forecasts.
Author: Christopher Thomas, Economist