Bloomberg News

Belgium’s Di Rupo Takes Office With Mandate to Fight Debt Woes

December 07, 2011

Dec. 6 (Bloomberg) -- Belgium’s first full-time government in over 18 months took office, with Prime Minister Elio Di Rupo pledging budget cuts to prevent the country from succumbing to the European debt crisis.

Di Rupo, 60, swore allegiance to the king in French, Dutch and German to become the first native French speaker to lead Belgium since the 1970s. The Finance Ministry was put in the hands of Steven Vanackere, the caretaker foreign minister, who succeeded Didier Reynders.

“Let’s give them a chance to succeed, to pull the country out of stagnation, to confront the financial storm, to consolidate the budget while relaunching growth,” La Libre Belgique editorialized today. “These are the challenges of the hour -- will they be capable of meeting them?”

Elections in June 2010 yielded a power struggle between the richer Dutch and industrially depressed French region, a stalemate that was only broken when a cut in Belgium’s credit rating and surging borrowing costs forced the feuding political elite to compromise.

Di Rupo, 12 cabinet ministers and six undersecretaries were sworn in by King Albert II at Laeken Palace on the outskirts of Brussels. Di Rupo will outline the government’s policies to parliament tomorrow, with a final confirmation vote on Dec. 10.

“Above all, I’m happy that the country has a government,” Joelle Milquet, the new interior minister, told RTL TV as the cabinet nominees awaited one last straggler before the ceremony.

The six-party government faces the immediate task of enacting a pledged 11.3 billion euros ($15 billion) in spending cuts and tax increases to pare the deficit to 2.8 percent of gross domestic product in 2012 as demanded by the European Union.

A Nov. 25 decision by Standard & Poor’s to cut Belgium’s credit rating by one step to AA triggered the final push to overcome the political inertia. At their peak on that day, 10- year bond yields reached 5.86 percent, the highest at the end of a trading day in 11 years, and Belgium’s extra borrowing rates over German levels hit 360 basis points.

Spreads Drop

Ten-year bonds now yield 4.34 percent, with the spread over German bonds down to 212 basis points. Still, the extra yield, a measure of the risk of financing Belgium’s debt, compares with 79 basis points on election day, June 13, 2010.

Belgium, the product of an 1830 revolution against Dutch rule, is split between an economically robust Dutch-speaking northern region and a French-speaking south blighted by industrial decay. A small German-speaking region in the east is the legacy of World War I.

Belgium had gone through eight attempts to mediate the deadlock since a separatist party headed by Bart De Wever emerged from the election as the dominant force in the northern region, Flanders. The politicking pitted De Wever against Di Rupo, the son of Italian immigrant coal miners known for his trademark bowties in red Socialist colors.

All-Night Bargaining

It took one final all-night bargaining session for the six parties -- representing the French and Dutch-speaking wings of the Socialists, Liberals and Conservatives -- to divvy up the Cabinet positions.

The new finance minister, Dutch-speaking Vanackere, 47, worked as a bank clerk before entering politics. His climb up the ladder included stints as manager of the Brussels port and transport authority. In 2009 he became foreign minister in the caretaker government headed by Yves Leterme.

Vanackere will swap jobs with Reynders, a French speaker who was finance minister for 12 years. Reynders, 53, will serve as foreign, European affairs and trade minister.

“You’ll hear a lot from me in the future,” Reynders told the Belga news agency.

The government will serve out the legislative term ending in mid-2014.

--Editor: Patrick G. Henry

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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