I originally thought I would devote a week to this series on the looming fiscal crisis, but there are so many nations with terrible fiscal policy that we’re now midway through the second week.

Today, let’s examine Belgium.

Like our other candidate countries, Belgium has a bloated welfare state that has become more oppressive this century.

The only thing that makes Belgium different is that the burden of government debt has not increased.

But that is hardly something to celebrate since it’s mostly evidence that Belgium has a stifling tax system (worse than Scandinavia by some measures).

Some of our friends on the left argue that welfare states can be fiscally stable so long as taxes rise as fast as spending.

But financial markets may not share that assessment. Just as is the case for many nations, interest rates on government debt have been climbing this year.

To be fair, interest rates may not be increasing because investors worry about a fiscal crisis and a possible default.

Instead, the above chart may simply indicate that markets expect higher inflation in the future (a back-door way of giving existing bondholders a haircut).

In the case of Belgium, it’s probably a combination of both.

And the fear of default may be the dominant factor since – as shown in this next chart – Belgium is facing a future of higher spending and higher debt.

This problem could have been avoided in part if politicians in Belgium had copied their Dutch neighbors and created a retirement system based on private savings.

That would still be the right approach for long-run fiscal stability. In the short run, however, Belgium desperately needs a Swiss-style spending cap.