Political parties in Belgium are split along Flemish-Francophone lines, and Flanders enjoys relatively less federal expenditures and pays relatively more federal taxes than Francophone Belgium. As the federal debt is serviced out of federal tax revenues, Flanders bears most of the cost of debt servicing, while on average having benefited the least from the deficit-funded expenditures. Those uneven net benefits from Belgian federal budget deficits – and the diverging incentives for federal budget deficits this disparity seems to create – may be an explanation of the large overall size of deficits and debt in Belgium since the 1970s. Hence, interregional fiscal transfers resulting from the federal debt may be important not just because of their distributional consequences, but even more because they may provide an explanation for the large Belgian federal deficits and debt burdens. We test for these differing deficit incentives by investigating the difference between the effect of an increase in net formula-based transfers on Flemish resp. Francophone Belgian federal government parties’ vote share. [...]