Belgium Gets Six-Party Coalition Government After Record 18-Month Standoff

Belgium will get a full-time government as soon as today, ending a record 540 days of post- election brinksmanship between the Dutch-speaking north and French south that kindled speculation of a national breakup at the heart of Europe.

The power struggle between the richer Dutch and industrially depressed French region was only resolved as the European economic crisis deepened, leading to a cut in Belgium’s credit rating, a lurch upward in its borrowing costs and the demise of its biggest bank, Dexia SA. (DEXB)

The job of keeping Belgium intact and shaving Europe’s fifth-highest debt load falls to a six-party coalition headed by Elio Di Rupo, 60, the first native French speaker to run the country since the 1970s.

“Our country needs a government, a genuine government, a government of the center,” Benoit Lutgen, head of the French- speaking Center Democratic Humanist party, said on Belgian television yesterday. “Our country has changed and it will change again.”

The six parties endorsed the governing program over the weekend. One final marathon bargaining session -- this time over the cabinet lineup -- went through the night, with no nominations as of 11 a.m. in Brussels. A deal would be followed, possibly later today, by the swearing-in by King Albert II at his Brussels castle and a policy presentation by Di Rupo to the parliament.

‘Sour Apple’

“The accord gives a necessary, hopeful, just, wise and prudent response to the challenges of tomorrow,” Wouter Beke, head of the Dutch-speaking CD&V conservative party, said yesterday. “We have to bite into the sour apple now and create a perspective for what will come next.”

The government faces the immediate task of enacting a pledged 11.3 billion euros ($15 billion) in spending cuts and tax increases to pare the deficit to 2.8 percent of gross domestic product in 2012 as demanded by the European Union.

Belgian borrowing costs spiralled higher as the political inertia combined with the escalation of the European debt crisis. At their peak on Nov. 25, 10-year bond yields reached 5.86 percent, the highest at the end of a trading day in 11 years, and Belgium’s extra borrowing rates over German levels hit 360 basis points.

Political Deadlock

The final push to overcome the political deadlock was triggered by the Nov. 25 decision by Standard & Poor’s to cut Belgium’s credit rating by one step to AA. The ratings company blamed the move on the costs of the federal takeover of Dexia, slowing growth and “the repeated failure of attempts to form a new government.”

Di Rupo’s success in going the last lap toward a government has since buoyed Belgian markets. Ten-year bonds now yield 4.50 percent, with the spread over German bonds down to 231 basis points. Still, the extra yield, a measure of the risk of financing Belgium’s debt, compares with 79 basis points on election day, June 13, 2010.

Strains between the six parties -- representing the French and Dutch-speaking wings of the Socialists, Liberals and Conservatives -- also kept them from clinching further deficit- reduction measures after 2012.

Ideology was on display at the weekend party congresses. Di Rupo was greeted with a rendition of L’Internationale, the global Socialist hymn, when he took the stage. Laurette Onkelinx, a party stalwart set for a cabinet post in the new government, called for a “resolute defense of our social model which protects the weakest.”

Eight Attempts

Belgium went through eight attempts to mediate the political stalemate since the elections turned a separatist party headed by Bart De Wever into the dominant force in the northern region, Flanders.

A founding member of the EU and host of the bloc’s main institutions and the North Atlantic Treaty Organization, Belgium straddles the divide between Europe’s wealthier, fiscally restrained north and economically troubled south.

Flanders generates annual economic production per person of 31,067 euros, according to 2009 figures. Blighted by industrial decay, the French-speaking south musters output per person of 22,868 euros.

Flanders funneled 5.8 billion euros, or 967 euros per Fleming, to the French region in 2005, the year of a central bank data-mining exercise too politically sensitive to be repeated since.

Federal Powers

While not demanding independence outright, De Wever’s N-VA party platform counted on Belgium, the product of an 1830 revolution against the Netherlands, to gradually “evaporate” as federal powers were shifted to the regions.

From the start, talks floundered between De Wever and a French political elite accustomed to “solidarity” from Flanders, home to Europe’s second-largest port and companies such as Anheuser-Busch InBev NV (ABI), the world’s largest brewer.

During the interregnum, Belgium was run by a caretaker government headed by Yves Leterme, a Flemish conservative who once lampooned the Dutch-language prowess of French Belgians and confused France’s national anthem with his own.

Fixers appointed by King Albert II were variously labelled “adviser,” “mediator,” “negotiator” and “pre-former.” At one point, the 77-year-old monarch reached into his terminological toolbox and named a “clarifier.”

Popular protests of the do-nothing politics reflected Belgium’s taste for irony, with student groups promoting a “French Fry Revolution” and one clique of men giving up shaving until a government emerged. The same mindset was behind a http://www.belgiq.eu/ website that displays a Google-like error message “Government Not Found.”

Lucky Winner

Le Soir, the country’s leading French-language newspaper, staged a raffle to guess when a government would be formed, offering the lucky winner his or her weight in waffles, a favored Belgian nutrient.

The logjam was only broken when Leterme’s allies in the CD&V party, dominant in Flanders until the rise of the N-VA, parted ways with the upstarts and backed Di Rupo’s blueprint for constitutional reform.

A first breakthrough came on Sept. 15 with the redrawing of the boundaries of a bilingual voting district surrounding Brussels, which Flemish speakers had claimed was biased in favor of the French.

The final result was the sixth constitutional overhaul since 1970, assigning more tax-collecting authority to the regions and setting a 20-year phase-out of revenue transfers from Flanders to the poorer French region.

The brittleness of the political peace was illustrated by a Dec. 2 La Libre Belgique poll showing that De Wever’s party, kept out of the new government, would pick up 39.8 percent of the vote in Flanders, up from 27.8 percent in the 2010 balloting.

The next election is slated for mid-2014.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; John Martens in Brussels at jmartens1@bloomberg.net

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

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