BELGIUM/FILE: Caretaking Prime Minister Yves Leterme pessimistic about chances of new government soon as Belgian political void sets record

Record ID: 1519853

  • Title: BELGIUM/FILE: Caretaking Prime Minister Yves Leterme pessimistic about chances of new government soon as Belgian political void sets record
  • Date: 29th March 2011
  • Summary: GHENT, BELGIUM (FILE - FEBRUARY 17, 2011) (REUTERS) BANNER FOR THE 'FRIES REVOLUTION'
  • Embargoed: 13th April 2011 04:52
  • Keywords:
  • Location: Belgium
  • Country: Belgium
  • Topics: Domestic Politics
  • Reuters ID: LVA4FATB05I4AZ3Q6NM62KU49A2O
  • Aspect Ratio: 4:3
  • Story Text: As Belgium's political deadlock continues, caretaking Prime Minister Yves Leterme said on Monday (March 28) that a new government could take weeks or even months to be put into place.
    Belgium will go without a government for a European record of 289 days since an inconclusive election in June, as many days as Iraq took last year to swear in a government.
    Students continue to plan protests -- the second phase of a 'Fries revolution' that started last month and despite a succession of mediators, facilitators and negotiators, the country seems as divided as it was on June 13.
    On Sunday (March 27), Flemish nationalists marched in Enghien (pronounced En-g-ien) saying the walloon town should be attached to Flanders.
    The political deadlock centres on Belgium's linguistic and economic divide. The Flemish in the north complain they are subsidising French-speaking Wallonia in the south, and have called for greater devolution of powers to the regions.
    Leterme told Reuters it could be weeks or months before Belgians get a new government.
    ''It's very difficult to to predict. I mean it's at least a question of weeks. Will it be a question of months ? The near future will tell us.'' Leterme said.
    The winners of the June's elections couldn't be more diverged: the socialist Elio Di Rupo in Wallonia and the nationalist Bart De Wever, leader of the N-VA party (Neue Vlaams Alliance), in Flanders.
    After more than eight months of negotiation, their points of view are still far apart and no progress has been made on a possible reform of the state.
    The government of Leterme has stayed in power with a caretaking capacity: it can deal with day-to-day business but is unable to carry on deeper reforms.
    ''We need a full fledged government because they are limits to what we call a caretaking government. It means that we are working on the most urgent dossiers from a point of view of guaranteeing the vital interest of the countries, of the country, but all other items like structural reforms for instance in the retirement schemes, pension reforms and so on, others like asylum and migration, fundamental reforms cannot be decided within the framework of a caretaking government,'' Leterme said.
    This also means delaying all structural reforms, Leterme said.
    The deadlock has caused uncertainty in financial markets. Yields on Belgian sovereign debt pushed higher, reflecting increased risk. Belgium has public sector debts almost equal to its annual economic output.
    Economists say a full fledged government would have to enact structural changes needed to reduce its public debt, which is forecast to rise to 98.1 percent of annual gross domestic product this year.
    Credit rating agency Standard & Poor's has said it might downgrade Belgium if it fails to form a government by June, but Leterme said the markets have no reason to worry.
    "They should not be worried at all about Belgium. I mean there is a political deadlock about state reform but the consequences of this deadlock are very relative. I mean our fundamentals are very sound, our growth figure is much more important than the average of the euro zone, we have a deficit in the budget which is much more limited than we agreed on with the European Union, we have a surplus in our payment balance, we are a very rich country, other countries are indebted towards foreign investors, we invest in foreign countries so it's totally different, the situation of Belgium is totally different,'' Leterme said.
    The failure of coalition talks makes a new election more likely, but polls show that the political landscape would not change radically and an election might not solve any problems.
    At best, new talks would face the same problems. At worst, a heated election could further entrench positions and destroy remaining trust between party leaders.
    The continuing political stalemate could result in the country splitting definitively into Dutch-speaking Flanders and French-speaking Wallonia. The prospect of this development would likely prompt a huge sell-off of Belgian government bonds.
    Key problems to resolve would be the future of Brussels, home to EU institutions and headquarters of NATO, as the largely French-speaking capital city lies within Flanders. Other key questions would be how to divide Belgium's debt fairly and what to do with the monarchy.
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