Belgium is emerging as a new focal point for sovereign debt risk in the Eurozone. The country—home to the EU's main institutions—is projected to run a budget deficit of 5.2% of GDP this year, with public debt exceeding 110% of GDP, both significantly off the trajectory set by EU fiscal rules. Meanwhile, fiscal consolidation negotiations within the coalition government have reached a deadlock, and Prime Minister Bart De Wever submitted his resignation on November 2, casting doubt on whether the country can produce a credible path to debt reduction. The bond market has already reacted. Belgium's 10-year government bond yield has climbed from about 3.5% to 4.
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