5 Francs – Belgium

In 1986, Belgium operated within the European Monetary System (EMS), a framework established in 1979 to reduce exchange rate volatility and foster monetary stability among member countries. The Belgian franc (BEF) was a central participant, pegged within the EMS Exchange Rate Mechanism (ERM) through a grid of bilateral parities. However, the franc was under persistent pressure due to Belgium's significant economic challenges, most notably a high and rising public debt—one of the largest in the industrialized world—and structural issues within its traditional industrial sectors. This necessitated a "hard franc" policy, where high interest rates were used to defend the currency's parity, often at the expense of domestic economic growth.

The domestic context was defined by a complex balancing act. The National Bank of Belgium prioritized exchange rate stability and low inflation, aligning closely with the strong Deutsche Mark as an anchor. This policy was successful in maintaining the franc's ERM band, but it came with social costs, including elevated unemployment and strained public finances. Furthermore, Belgium's unique linguistic and regional divide influenced economic policy, with debates often centered on fiscal transfers between Flanders and Wallonia, adding a layer of political complexity to budgetary decisions aimed at satisfying international and EMS obligations.

Looking forward, 1986 was a year of consolidation within the existing system rather than dramatic change. The Belgian authorities remained firmly committed to the EMS discipline, viewing it as a crucial anti-inflationary anchor and a stepping stone toward broader European integration. This commitment would be severely tested later in the early 1990s during the ERM crises, but in 1986, the focus was on maintaining stability through restrictive monetary policy while grappling with the long-term domestic fiscal imbalances that the strong currency policy helped to expose.