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Belgian King Pauses Coalition Talks as Di Rupo Seeks to Quit

Belgium’s King Albert II suspended coalition talks as Elio Di Rupo offered to resign from leading the negotiations after the six parties involved failed to agree about how to cut the nation’s budget deficit.

The monarch put his decision on hold after receiving Di Rupo’s resignation offer during a meeting in Ciergnon, the royal palace said today in a statement. Di Rupo, 60, went to meet the king after six-party talks to hammer out a 2012 budget and cut the deficit to 2.8 percent of gross domestic product next year ran aground.

“The king asks each negotiator to take some time for reflection in the coming hours, consider the consequences of a failure and actively seek a solution,” according to the palace’s statement. “He reminds” them “about the gravity of the current situation.”

Belgium may face European Union sanctions as early as next month for failing to tackle a budget deficit that’s projected to widen next year because of slowing economic growth. After 17 months, Belgian coalition talks have produced only institutional agreements over the distribution of tax revenue and regional fiscal autonomy. It’s the second time Di Rupo has offered his resignation to the king since his appointment on May 16 to form a federal government.

Belgian government bonds fell today and the extra yield investors demand to hold Belgian 10-year securities instead of German Bunds of similar maturity, Europe’s benchmark, widened 9 basis points to 290. The so-called spread reached a record 321 basis points on Nov. 17.

Budget Shortfall

The EU forecast on Nov. 10 that Belgium’s budget shortfall would widen to 4.6 percent of GDP next year from an estimated 3.6 percent this year.

Belgian coalition negotiators assumed the economy’s expansion will slow to 0.8 percent in 2012, which would translate into a deficit of 5.3 percent of GDP without spending cuts or additional taxes, according to projections by the High Council of Finances published on Oct. 31.

King Albert II didn’t accept Di Rupo’s first resignation offer in July after Bart De Wever’s New-Flemish Alliance, the top-vote refused to revive coalition talks that broke down 10 months earlier.

Instead, Di Rupo left out the Flemish nationalist party and started eight-party talks about institutional aspects required a two-thirds majority in parliament. He began six-party government-formation talks in October.

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 acullen8@bloomberg.net

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