Belgium’s Political Feud Nears End as Di Rupo Prepares to Form Government

Belgium neared the end of a 536-day political feud with an accord to form a full-time government that vows to prune the budget deficit to confront the financial crisis.

Elio Di Rupo, a French-speaking Socialist, is set to take office next week in charge of a six-party coalition, political leaders said after the governing program was completed late yesterday. A cut in Belgium’s credit rating by Standard & Poor’s last week triggered the final push to end the stalemate between Dutch and French speakers that had threatened to tear the country apart.

“It’s the end of the tunnel,” Laurette Onkelinx, a Socialist in the current caretaker cabinet, told Le Soir newspaper.

The six parties will hold conventions this weekend to approve the coalition accord, with the goal of Di Rupo being sworn in as prime minister by King Albert II at the start of next week. The agreement came after Standard & Poor’s reduced Belgium’s credit standing one step to AA with a negative outlook on Nov. 25.

Belgian bonds have gained for four straight days since the ratings cut prompted the negotiators to reach a deal on reducing the budget deficit. Ten-year bond yields fell below 5 percent today after last week reaching 5.91 percent, the highest in 11 years.

Budget Deficit

Europe’s sovereign-debt crisis may challenge the Di Rupo coalition’s goal of narrowing the budget deficit to 2.8 percent of gross domestic product next year. S&P said that it may cut Belgium’s rating again should its net government debt rise to 100 percent of GDP from an estimated 93 percent this year.

Moody’s Investors Service said this week that the “rapid escalation” of the debt turmoil is threatening all of the sovereign ratings in the region. Moody’s put Belgium’s Aa1 rating under review for a downgrade last month, and Fitch Ratings said on Oct. 20 that a “more aggressive” debt- reduction program is needed for Belgium to retain the second- highest credit ranking.

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

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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