Belgium may become the next debt flashpoint in Europe amid fiscal disagreements and mounting market pressure

(1) Under the shadow of France’s sovereign debt crisis, Belgium may become the next flashpoint to spark a crisis across the entire Eurozone. (2) One of the lessons from the European debt crisis more than a decade ago is that the trigger for a sovereign debt crisis is not the size of an economy; at the time, Greece accounted for only 2.5% of Eurozone economic output yet almost caused the union’s collapse. (3) Eurozone countries are bound together through the bond market, and the EU is not a US-style federation. Debt consolidation led by the European Commission is a Brussels goal but is unlikely to be realized. (4) Brussels has long leveraged the NextGenerationEU fund for joint financing in the capital markets, providing grants and loans to member states. Spain and Italy have benefited the most, and joint indebtedness is gradually expanding through new financing tools. (5) Brussels has recognized that fragmented capital markets during a crisis will exacerbate problems; if a member state comes under pressure in the bond market, speculative capital will flock to the weakest fiscally, causing a domino effect. (6) The survival of this structure still hinges on the credit status of the Federal Republic of Germany, which has recently lost its previous stability. (7) France’s political paralysis and sovereign debt issue have attracted much discussion recently. Its annual debt growth rate exceeds 5%, and by year-end, the debt-to-GDP ratio is expected to surpass 120%, with signs of a brewing financial disaster. (8) This year, Belgium’s budget deficit is estimated at about 5.2% of economic output, far exceeding the long-invalid Maastricht criteria, and national debt as a proportion of GDP is now over 110%. (9) Prime Minister De Wever's consolidation plan failed; a multi-billion euro savings scheme originally scheduled to last until 2029 collapsed due to disagreements in the ruling coalition over which groups should bear the reform costs. (10) Belgium’s federal structure distributes fiscal responsibility among Flanders, Wallonia, and Brussels. The frugal Flemish advocate spending cuts, while the more spending-oriented Walloons demand exemption from fiscal reductions; every austerity policy quickly evolves into a regional power struggle. (11) On November 2, De Wever submitted his resignation. King Philippe initially refused, instead instructing him to launch a new round of negotiations. The solution to the fiscal deadlock remains unresolved. (12) Market pressure is already visible in the bond market; Belgium's 10-year government bond yield has risen from about 3.5% to 4.25% in just a few months. If consolidation fails, the country risks plunging into a debt vortex of rising interest rates, climbing refinancing costs, and widening risk premiums.