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Belgium to Finally have a Government

December 2, 2011

It is now offical—18 months after its last general election, Belgium will officially have a government headed by Elio Di Rupo.  While this blog had previously wondered if Belgium even needed a government, it appears that the time has come for politicians to put aside enough of their differences that a coalition could be created.  The impetus for enough parties to agree on the first Walloonian Prime Minister in more than 30 years was the same story that has been changing governments across the EU—the Euro Debt Crisis.  As the below graph shows, despite having a government debt ratio of 96% of GDP, Belgium had managed to survive the wrath of the bond markets.  However, the bond markets have started to pay attention to this country, and interest rates started to rise.  While they are still safely below the magic number of 7% (which is when other Eurozone members have sought bailouts), interest rates had finally reached the level that forced Belgian politicians to act.  So far, the bond markets have been responding positively to the news that Belgium now has an elected government, as rates fell from a peak of 5.86% to 4.75%.  Now, if only that could happen for other Eurozone countries.

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