Belgium appears to have avoided catastrophe, having been entangled in a protracted government crisis since general elections held in June 2010.
Under pressure from the markets and threatened by financial sanctions at European level, Belgium is on the way out from the longest government crisis in its history, after negotiators found an agreement on the 2012 budget over the weekend.
The six political parties involved in government coalition talks clinched a deal on the 2012 budget after ratings agency Standard & Poor's had downgraded Belgium's credit to AA from AA+, with yields on 10-year government bonds approaching 6% on Saturday.
The European Commission had put additional pressure on Belgium, threatening the country with a €700-million fine if it failed to take measures to reduce the public deficit by mid-December.
"This is one of the most important fiscal consolidations since World War II. … We will present a responsible and rigorous 2012 budget," said Di Rupo, chief negotiator in charge of forming a cabinet and most likely Belgium's next prime minister. He said that savings of more than €11.3 billion had been agreed starting in 2012.
Calling on the nation
Speaking in French and in Dutch, Di Rupo, leader of Walloon Socialists, called on trade unions and citizens across the country to back the consensus reached by the French and Dutch-speaking parties – the socialists, liberals and Christian Democrats.
Di Rupo said that "efforts of a government and a parliament" were not enough to overcome the divide.
"Together we must roll up our sleeves to get the country out of the crisis," Di Rupo said, adding that the six political parties were hoping to form a government during the week.
He said that the agreed budget for 2012 would reduce the deficit to 2.8% of GDP, below the Maastricht criteria for the stability of the euro currency, and that the next budgets for 2013 and 2014 would allow the country to achieve a balanced budget.
The country will also reform its employment and pensions regulations. The legal retirement age will not be raised from the current 65 years, but the minimum age for early retirement will be raised to 62 by 2016.
Belgium's controversial wage indexation policy will remain in place, but it will revise its policy, much criticised by the Flemish-speaking part of the country, of giving unemployed people a percentage of their former salary indefinitely.
Belgium has set a record for being without a formal government (see background).
On 8 October, negotiators from eight political parties, involving the Greens on both sides of the country's ethnic divide, reached an agreement to overhaul the Belgian state.
The agreement will give the country's two main regions, Flanders and Wallonia, more power to raise their own taxes, setting them further apart and weakening the federal level.