Belgium's political crisis is deepening, and since it is part of the eurozone it is being reflected in the Belgian debt market. The 10-year bond yield is up 10 bp today to above 4% and the two-year yield is up 4 bp. Late yesterday the seven parties failed to resolve their differences and put in a new government. Recall that last month, S&P put Belgium's AA+ rating on negative watch, due in large part to the political stalemate which prevents strong action to stabilize Belgium's debt, which is among the highest in the eurozone (as a percentage of GDP).
The election was in mid-June of last year, and the Belgium premium was almost 80 bp. It now is above 105 bp. Of course, the pressures on the eurozone are actually much larger than Belgium, but this is yet another example of a weak political situation preventing the adequate addressing of the financial challenges. Belgium may be dissolving and although it is common to compare U.S. problems with Europe's, there is nothing comparable in the U.S. of a dissolution of a country, or of some state or states leaving.