Bloomberg News

Belgium Moves Toward Full-Time Government After 488-Day Deadlock

October 13, 2011

Oct. 14 (Bloomberg) -- Belgium moves today toward forming a full-time government after 488 days of stasis as Prime Minister- designate Elio Di Rupo starts six-party coalition talks.

Negotiations get under way at 12 p.m. in Brussels with a focus on finding budget cuts to meet European targets of bringing the deficit down to 2.8 percent of gross domestic product in 2012.

“Slowly but surely Belgium is edging closer to forming a government,” Guillaume Menuet, an economist at Citigroup Inc. in London, said in a research note. “Given the remaining work to be done on the budget and other policies, it is likely that a fully fledged administration still remains a few weeks away.”

Belgians can thank Europe’s debt crisis for the breakthrough, as a rise in borrowing costs and threatened credit downgrades raised the urgency of ending the north-south political feud in the country.

Ten-year Belgian bonds yield 4.34 percent, or 223 basis points more than German bonds, Europe’s benchmark investment. The extra yield has risen from 79 basis points on election day, June 13, 2010.

The political paralysis led Standard & Poor’s Ratings Services and Fitch Ratings to assign a negative outlook to Belgium’s debt, now ranked the second-highest investment grade.

Constitutional Amendments

The state’s coffers were further strained last week by the 4 billion-euro ($5.5 billion) purchase of crisis-hit Dexia SA’s domestic bank unit, which prompted Moody’s Investors Service to put Belgium under review for a downgrade as well.

The coalition talks were made possible by an accord to overhaul the constitution for the sixth time since 1970, handing more powers to the regions and lessening financial transfers from the Dutch-speaking north to the poorer French south.

Success in the talks would make Di Rupo, 60, the first native French speaker to run the linguistically polarized country since the 1970s.

“It’s urgent that we grapple with the social and economic policy issues and draft the 2012 budget,” Di Rupo said yesterday. “International, financial and social conditions force political leaders to form a government urgently.”

The Dutch- and French-speaking wings of the Socialist, Liberal and center-right parties will make up the new government. Di Rupo bowed to pressure from Dutch speakers to keep the Greens out.

Nationalist Party

Di Rupo’s coalition will control 93 of 150 seats in parliament. The French- and Dutch-speaking Greens have pledged to supply enough votes for the two-thirds majority needed to revise the constitution.

No deadline was set for concluding the talks, which mark at least the temporary eclipse of a nationalist party, the N-VA, which polled the most votes in Flanders in the 2010 election.

The N-VA leader, Bart De Wever, took part in the constitutional jousting for 13 months until being ditched by mainstream Flemish parties that grew tired of his brinksmanship.

De Wever criticized the new governing formula as illegitimate, saying the three Dutch-speaking parties tapped for the coalition won’t represent a majority in Flanders for the first time in Belgian history.

“The Flemish form a majority in the country and pay the lion’s share of the taxes, but soon we will be ruled by a government dominated by French speakers,” De Wever said in an e-mailed statement yesterday.

--Editors: Patrick G. Henry, Jones Hayden

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; John Martens in Brussels at jmartens1@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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