While the deficit target and measures to reach it have been agreed by Belgium's six-party ruling coalition, economists expect more austerity steps may be necessary given a weakening economic outlook for the country and the euro zone as a whole.

Vanackere told Reuters in an interview that if periodic checks during 2012 showed Belgium was off course to achieve the target, new measures would be implemented.

"The 2.8 percent will be achieved. If growth estimates are downgraded in March, that will of course imply new measures to guarantee the result of 2.8 percent," he said.

"2012 will be a year in which we will have several budget controls. We will be very active on that level and we will achieve the 2.8 percent," he said.

Moody's cut Belgium's rating by two notches late on Friday to Aa3 from Aa1, citing deteriorating financing conditions in the euro zone, risks to economic growth and the costs of bailouts of banks such as Dexia (DEXI.BR).

"No finance minister is glad when there is a downgrade of a country, but at the same time it is not a big surprise," Vanackere said.

"Everyone knows that in the whole of the euro zone there are downgrades and Belgium in particular, with a large banking and financial sector, is of course vulnerable through the immense operations to save the banking sector."

Crisis-hit Franco-Belgian bank Dexia (DEXI.BR) secured earlier this month temporary financing guarantees from Belgium, France and Luxembourg to keep it running while the countries cement a bailout they put together in October.

The three states gave 90 billion euros ($121 billion) of guarantees to cover Dexia's borrowings.

However, these guarantee have yet to take effect, sparking talk the states were wrangling about how the burden should be shared. Reports of fresh talks last month hit both Belgian government bonds and the euro.

"It is clear that when a state gives a guarantee there is a risk," Vanackere said about Dexia.

"Our job is to minimize the risk and make sure that the restructuring of the financial sector and Dexia in particular, goes at a swift pace to minimize the problems for Belgium," he said. "I am quite convinced that we will be able to come to good solutions, but I'm not going to comment too much on that."

Vanackere said that apart from austerity, Belgium had to take steps to boost economic growth and that it could do that through better use of its labor market, noting Belgians worked on average 3-4 years less over their entire careers than the European Union norm.

"We have tremendous untapped potential in the Belgian labor market. When we get more people to work we will also be able to steam up growth," he said.

"As we speak, rules and new measures are being taken to prolong the length of careers and to postpone the age of retirement."

(Reporting By Phil Blenkinsop, writing by Jan Strupczewski; Editing by John Stonestreet)

• A Permanent Economic Emergency