Belgium Politics December 2018

Belgium

Belgium: Prime minister resigns amid migration-pact row

December 19, 2018

Prime Minister Charles Michel resigned following a no-confidence vote on 19 December, ending a short-lived minority government torn apart by Belgium’s position on a UN-led migration pact. Only days into Michel’s minority government, which came into existence in early December when his coalition partners, the New Flemish Alliance (NV-A), abandoned him over the government’s support for the so-called Marrakesh pact, analysts had expected some turbulence. At this point, Michel’s resignation could bring forward next May’s scheduled elections. If not, a caretaker government is likely to serve in the interim.

Although the economic consequences of the political crisis are expected to be minor, the recent chaos has highlighted several pressing issues facing the government. First and foremost, next year’s budget has yet to be approved and the government will be forced to operate on supplementary spending in the meantime. Moreover, the badly-needed economic reforms promised by the government last summer will most likely be shelved until, at least, the dust has settled after next year’s vote.

Commenting on Michel’s resignation and its consequences for next year’s budget and promised reforms, Peter Vanden Houte, chief economist at ING, noted:

“We feared this new government would become a lame duck, but it turned out to be a sitting duck. […] While all of this is rather uncomfortable, it won't make a substantial difference in terms of public finances. […] While this has no major short-term consequences, reforms are certainly needed to support the longer-term growth potential and the sustainability of the pay-as-you-go pension system. It is unclear if these things will be picked up again by the next government. The election result might make it more difficult to form a stable reform-minded federal government.”

FocusEconomics Consensus Forecast panelists see growth at 1.5% in 2019, which is unchanged from last month’s forecast, before notching down to 1.4% in 2020.


Author:, Economist

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