Belgian Government Falls on Rift Over Regions' Powers (Update3)
John Martens
July 15 (Bloomberg) -- Belgian Prime Minister Yves Leterme's four-month-old government collapsed after failing to heal a rift between French- and Dutch-speaking voters that may threaten to split the country.
King Albert II is considering the resignation Leterme submitted just before midnight yesterday, the royal palace said in a statement today in Brussels. Leterme's coalition, which took a record nine months to pull together, fractured after missing a self-imposed July 15 deadline for getting an agreement on regional autonomy and on splitting a disputed voting district.
The resignation plunges the country into the worst political deadlock in its 177-year history at a time when the fastest inflation in almost 24 years is eroding Belgians' purchasing power and slower economic growth threatens the budget. Consumer confidence dropped to a three-year low last month.
``We're facing the worst financial and economic crisis since the end of World War II and nobody in Belgium seems to care,'' said Mark Eyskens, a member of Leterme's Christian Democratic Party who served in Belgian governments from 1976 to 1992 and was prime minister in 1981-82. ``We need a government.''
The government's collapse may prompt more concern that Belgium's federation may fall apart, a prospect complicated by the fact that the capital of Brussels is surrounded by Flemish territory. The city of 1 million people hosts the European Union's main institutions as well as the North Atlantic Treaty Organization.
`New Era'
``We're entering a new era today and we need to look at what we still want to do together in this country,'' Christian Democrat Hendrik Bogaert said in a televised interview on public broadcaster VRT.
Belgians have witnessed five overhauls of their nation's governing structure since 1970, which has led to the official recognition of Dutch, French and German-speaking communities, as well as the creation of three regions: Dutch-speaking Flanders in the north, French-speaking Wallonia in the south and bilingual Brussels in the middle. The country has been a federal state since 1993.
Economic production per person in Flanders is 124 percent of the EU average, compared with 90 percent in Wallonia, breeding resentment that Flemish taxes are used to subsidize an underperforming economy in the south.
Political Options
King Albert will accept Leterme's resignation only when he can appoint a mediator to explore the political options, Eyskens said. The monarch last night met with former government negotiator Herman Van Rompuy, a member of Leterme's Christian Democrats, and with Finance Minister Didier Reynders, the leader of the French-speaking Liberals.
``We must continue with this government,'' Reynders told VRT in a televised interview today. ``It's a problem of trust'' among the parties. ``We'll need a few hours, a few days to get more trust,'' he said.
The political uncertainty may threaten Belgium's goal of a balanced budget this year and undermine its efforts to cut government debt, which is the third-highest in the EU as a percentage of gross domestic product. The cost of financing Belgium's debt has risen almost one percentage point since the last year's elections.
The yield on Belgian 10-year notes has gained 93 basis points, or hundreds of percentage point, since the June 2007 vote, to 4.72 percent at 2:41 p.m. in Brussels today. The securities yield 37 basis points more than those of the German benchmarks with similar maturity, the most in more than three months. Yields move inversely to bond prices.
`No Big Selling'
``So far there has been no big selling, which makes sense, as the prospect of a Belgian breakup is still a remote one,'' Padhraic Garvey, the head of investment-grade debt strategy in Amsterdam at ING Bank NV, said in a client note today. Nonetheless, ``the preference is still to lighten up some.''
Leterme's party won the most votes in the 2007 election in Flanders, the largest of the nation's regions and home of every Belgian prime minister since 1979. Initial attempts to form a government met resistance from French-speaking parties that objected to Flemish calls for more local control over taxes, labor-market policy and health-care spending.
Leterme, 47, who won more votes than any candidate since 1979, angered French speakers by doubting their ability to learn Dutch and, on last year's July 21 national holiday, by humming France's national hymn when asked if he knew Belgium's anthem.
2008 Budget
He took over from Verhofstadt, a Flemish Liberal who was elected in 1999 and re-elected in 2003. Verhofstadt stayed on as a caretaker after last year's vote, and was given a third formal three-month term in December to pass the 2008 budget. Leterme's government was scheduled to last until 2011.
``It's outrageous to let the coalition collapse over something as futile as the split of a voting district,'' Eyskens said.
French- and Dutch-speaking politicians under the leadership of Leterme failed to agree on splitting the Brussels-Halle- Vilvoorde voting district, which encompasses both the bilingual capital and 35 surrounding Flemish municipalities. The district has been an anomaly since the country switched to provincial voting in 2003 because it stretches over two separate regions and isn't aligned to the provincial borders like all other voting districts.
To contact the reporter on this story; John Martens in Brussels at jmartens1@bloomberg.net