The breakthrough in negotiations seems to have been due to rising fears over the country’s debt situation. This 580 day political squabble was one of the reasons given by Standard & Poor’s when it downgraded the status of Belgian sovereign debt from double A plus to double A.
This week agreement was been reached by the six parties on new financial regulations governing the banking sector as well as on consumer protection, along with a series of other small but sensitive issues.
The formation of a government has previously been hamstrung by tension between Flemish nationalists who demanded wide-ranging reform of the federal government, including more autonomy for its regions. Wallonia, whose economy has lagged behind that of Flanders, has resisted devolution amid fears that will result in lower social payments.
Six parties will be represented in the coalition, made up of centre-right, centre-left and liberals from both parts of the country.
Cabinet appointments will be decided in the coming days. Elio Di Rupo, leader of the French-speaking Socialist party and for months the man leading the government-formation talks, will become prime minister, the first Walloon to hold the role in over three decades.
The budget deal agreed by the six parties comes on top of earlier agreements that would accede to Flemish demands for a looser confederation, though falling well short of the manifesto of the Flemish nationalists that won the previous elections.
The New Flemish Alliance, or NVA, will not join the next coalition, leaving it as the only major opposition party.