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Belgium Taps Legislator to Defuse `Political Crisis' (Update1)

By James G. Neuger

Aug. 29 (Bloomberg) -- Belgium's king, warning of a ``political crisis,'' tapped the head of the lower house of Parliament to explore options for forming a new government after an 11-week standoff between French and Flemish parties spurred concerns that the country might break apart.

The head of the Flemish Christian Democrats, Yves Leterme, last week abandoned a bid to put together a coalition as French- speaking parties torpedoed demands for the transfer of more power to Flanders, the country's wealthier northern region.

With Belgium lacking a new government almost three months after national elections, the king described the deadlock as a ``crisis,'' and a poll showed that fewer than a third of Belgians are certain that the country will still exist in 10 years.

King Albert II today picked Herman Van Rompuy, a Flemish Christian Democrat, to sound out political leaders and report back on possible coalitions. Van Rompuy, 59, was budget minister in the 1990s and now chairs the lower house of Parliament.

Van Rompuy was put ``on an exploratory mission with the goal of finding a solution to the current political crisis,'' the king said in a statement released on the Belga newswire.

Patched together as a buffer state in 1830, Belgium was dominated by a French-speaking elite until after World War II, when the coal and steel industries in the south declined and a more modern economy took root in Flanders.

`Definitely Won't'

Only 29 percent of the country's citizens are ``certain'' that there will still be a Belgium in 10 years, according to a poll published yesterday in La Libre Belgique. Twenty-four percent said Belgium ``probably won't'' and 15 percent said it ``definitely won't'' exist in a decade.

The poll of 663 people was conducted by ANT Research between Aug. 24 and 27. The margin of error was 4 percent.

Belgium's 10.6 million people are spread between the Flemish north and French-speaking south, with officially bilingual Brussels in the middle and a small German-speaking enclave in the east. In Parliament, Van Rompuy represents a voting district that includes Brussels and most of the Flemish suburbs that ring the city.

The political impasse is putting the economy at risk and undermining competitiveness, the country's top business group warned last week.

Belgium is saddled with some of Europe's highest taxes and labor costs, and is still working off debt that piled up in the 1970s and 1980s. The economy will probably grow 2.3 percent this year, lagging behind the 2.6 percent pace of the euro region, according to European Union forecasts.

`Deadlock'

``The country absolutely needs a stable government,'' the Federation of Belgian Enterprises said last week. It called for ``balanced solutions that lead the way out of the deadlock.''

Flemish economic output per person is 124 percent of the EU average, and there is growing resentment that Flemish taxes are used to subsidize the poorer French-speaking south, where economic output is 90 percent of the EU average.

The business federation, representing companies on both sides of the language divide, called for a government ``as rapidly as possible'' to address the shortage of qualified labor and bring down costs.

The logjam will have no impact on Belgium's credit rating because the commitment to cutting the national debt is broadly shared across the political spectrum, Standard & Poor's said last week.

Belgium's Debt

Belgium's debt has fallen to 89.1 percent of gross domestic product from a peak of 137.9 percent in 1993. Standard & Poor's rates Belgium AA+, one level below the top AAA rating, with a stable outlook.

Leterme, 46, had sought to corral his Christian Democrats, the Flemish Liberals and their French sister parties into a new coalition with a mandate to loosen the federal government's control over taxes and social security.

The talks fell apart after Leterme's nominal ally from the French-speaking region, Joelle Milquet of the Democratic Humanist party, balked at Flemish demands for more autonomy.

Leterme's party won the most votes in Flanders in the June election. Christian Democrats and Liberals from the two halves combined for 81 of the 150 seats in Parliament, enough to form a government but short of the two-thirds majority needed to change the constitution.

In the meantime, the outgoing prime minister, Guy Verhofstadt, a Flemish Liberal, remains in power in a caretaker capacity.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

Last Updated: August 29, 2007 10:36 EDT

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