Messy Belgium parliament likely to orchestrate a Vivaldi encore

Our central scenario is a repeat of the current Vivaldi coalition after the June election with a continuation of the current policymaking environment. Although this base case hinges on a very delicate balance, the other plausible alternatives would have a limited impact on our forecast.

What you will learn:

• Forming a coalition in Belgium is a lengthy and bumpy process, but we will likely have to wait even longer this time, given the loss in popularity of the current government and Dutch-speaking nationalists gaining in the polls. However, alternative coalitions are unlikely to take off.
• The nationalist New Flemish Alliance would struggle to assemble a government, and crucially, it would have its hands tied by the Socialist Party, which would contain pro-independence vows and maintain institutional stability. In this scenario, structural reforms might see a slower implementation if efforts to find an agreement are focused on deepening decentralisation.
• Flemish Interest could lead a coalition only if it obtained many more seats than suggested by the polls, making our worst-case scenario a tail risk. Groundbreaking institutional changes would still be unlikely as they require a two-thirds majority, but volatility in Belgium’s sovereign bond market could not be ruled out, which is different from the past when politics had no impact.