Bloomberg News

Belgium’s Di Rupo Starts Six-Party Talks to Form Government

October 13, 2011

(Updates with comment from Di Rupo in second paragraph, Belgian bonds in fourth.)

Oct. 13 (Bloomberg) -- Elio Di Rupo, the leader of Belgium’s French-speaking Socialist Party, said he will begin six-party talks to form a government 16 months after an inconclusive election.

“Drawing up the 2012 budget is the top priority,” Di Rupo, 60, said today in an e-mailed statement. “International, financial and social conditions force political leaders to form a government urgently.”

Belgium’s inability to form a national government led both Standard & Poor’s Ratings Services and Fitch Ratings to assign a negative outlook to Belgium’s debt, now ranked the second- highest investment grade, and has inflated borrowing costs relative to the six AAA euro-area nations. The potential cost of rescuing Dexia SA prompted Moody’s Investors Service last week to put Belgium under review for a downgrade as well.

The yield on Belgium’s 10-year bonds climbed to as high as 4.28 percent today, the highest level in more than two months and a 62 basis-point increase from 3.65 percent on Sept. 30. The 4.25 percent securities due September 2021 fell 0.29, or 2.90 euros per 1,000-euro face amount, to 100.035 as of 2:05 p.m. in Brussels.

Belgian government bonds have lost 3.2 percent since Sept. 30, the second-worst performance in local currencies among 26 markets tracked by Bloomberg/EFFAS indexes. Greek bonds have tumbled 7.9 percent so far this quarter.

Di Rupo’s six-party coalition includes three parties from each side of Belgium’s French-Dutch linguistic divide. He informed King Albert II of his plans today after five months of talks produced breakthrough agreements on the distribution of tax revenue, transfer of additional spending powers to the regions and an electoral-district dispute that had stymied Belgian leaders for years.

The coalition, with 93 of 150 seats in parliament, would need extra support to vote those agreements into law. Belgian law requires a two-thirds majority overall and a simple majority among both linguistic groups to pass constitutional amendments. Ecolo-Groen, with 5 Flemish lawmakers in a group of 13, has pledged to back the initiatives, allowing the coalition to meet both requirements.

--Editors: Patrick G. Henry, Jones Hayden

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at htromm@bloomberg.net


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