De Wever I: A Long-Awaited Government – What It Means for Belgium

After six months of negotiations, Belgium finally has a new federal government. The De Wever I coalition is notably leaner than previous governments, with 15 ministers including the Prime Minister. While this efficiency is welcomed, it also concentrates significant responsibilities on key ministers like Jan Jambon (Finance, Tax, and Pensions) and Frank Vandenbroucke (Social Affairs and Public Health).

 

 

Nicknamed the “Arizona coalition”—a nod to the colors of its parties (blue for Walloon liberals, yellow for N-VA, orange for CD&V and Les Engagés, and red for Flemish socialists)—this government faces substantial economic and social challenges. Here are four key takeaways from our economic perspective:

 

1. The budget is voluntaristic and will need additional measures to improve towards the European targets

The budget plans contain clear numbers, but it relies on optimistic assumptions and open-ended policies. This is not uncommon for experienced budget analysts over the past 40 years, but the De Wever I government has taken it to a new level. In the past, the Martens (1980s) and Dehaene (1990s) reforms created significant budgetary windfalls, substantially contributing to deficit reduction. However, these gains were the result of deep and structural reforms. In contrast, the current government has already accounted for savings before the necessary reforms have been fully implemented,

A key expectation is the cancellation of Belgium’s unique unlimited unemployment benefit system. However, with unemployment already declining due to an aging population, the real issue is the explosion in long-term sickness benefits, which now cost twice as much as unemployment benefits.

Nevertheless, achieving an 80% employment rate would generate economic growth and increased tax revenues, but without clear execution plans, this remains an ambition rather than a concrete path forward. Should targets not be met, higher taxes could follow, increasing public dissatisfaction and coalition tensions—a major risk for this government.

 

2. The emphasis of the Arizona government is on “socio”-topics, at the expense of “economic”-topics.

The main negotiators of the Arizona coalition have shown a stronger affinity for societal concerns such as security, defense, immigration, and public order, responding to a longstanding public frustration that has fueled extremist parties on both sides of the political spectrum. They recognize that this might be a final opportunity to counter criticism regarding unmanaged migration, reduced defense spending, and inefficiencies in law enforcement and the judicial system.

At the same time, economic and industrial challenges, including recent plant closures, weak job creation, and the lack of a stronger entrepreneurial climate, have been largely overlooked apart from some lip service. While these issues might be framed as regional concerns, without federal support and concrete measures, meaningful improvements are unlikely.

Bart De Wever, as a historian, places societal cohesion above economic matters, seeing business and industry primarily as means to achieve budgetary objectives rather than core policy priorities. This contrasts with the Martens and Dehaene governments, which, when faced with similar budgetary challenges, placed a greater emphasis on economic recovery and structural reform.

 

3. The heavily debated “capital gains tax” will cost more than it yields.

A 10% capital gains tax has been introduced—something even past left-wing governments couldn’t achieve. This kind of tax had gained more airplay than for instance ideas to reduce the record high public spending and “big state” in Belgium. However, the exact modalities remain unclear, and the risk is that it becomes an overly complex tax with unintended consequences. For example, the focus will be on evading capital gains, where a country should have a tax system that encourages to create capital gains and additional wealth.

Belgium may be the only country where “taxing the strongest shoulders” is explicitly stated as a government objective, while other nations actively compete to attract and retain top talent and high-net-worth individuals.

This policy also erodes one of Belgium’s last remaining competitive advantages for drawing foreign investment, encouraging risk-taking, and fostering entrepreneurship. As a result, diplomats and economic policymakers will face an uphill battle convincing investors to choose Belgium, as the country increasingly positions itself as the world's most complete tax museum.

 

4. Climate and energy policies: old targets, new policies

Belgium remains committed to the Paris Agreement but has reversed its stance on nuclear power—a much-needed adjustment, though possibly too late. Energy policy will now focus on maintaining 4GW of nuclear capacity, but rising system costs for renewable infrastructure remain a challenge. Achieving this will require time, well-defined policies, and strong leadership, including within public enterprises.

The consequences for the competitiveness of Belgium, and its industry in particular, could come faster than the impact of the adjusted policies, however.

 

The Big Picture

The relief of finally having a government is now mixed with unease about the agreement and its implications for all different stakeholders.

We are cautiously optimistic, given Belgium’s complex institutional landscape and the significant influence small political parties can have on the final agreement. However, our main concerns remain: the lack of reform in the “big state” (a D.O.G.E.-light approach would be welcome), the absence of substantial measures to restore competitiveness, and weak budgetary safeguards.

On the positive side, while labour market and pension reforms are modest, they are a step in the right direction. A more pragmatic approach to climate and energy policy is also a welcome shift. Lastly, the greater focus on “society building” is both important and timely, and we hope it will deliver tangible results.

Belgium needs strong leadership, bold economic measures, and a renewed focus on growth. The Arizona coalition has a historic opportunity—but will it seize it?