June 14, 2010 / 4:33 PM / in 9 years

Belgium starts efforts to agree on coalition govt

BRUSSELS (Reuters) - Belgium started the search for a coalition government on Monday after Flemish separatists won a parliamentary election, causing some unease on financial markets over the country’s long-term future and its growing debt.

Bart De Wever (L), president of the Flemish right-wing party New Flemish Alliance (N-VA), arrives for a meeting with Belgian King Albert II at the Royal Palace in Brussels June 14, 2010. REUTERS/Francois Lenoir

Concerns about calls by the victorious New Flemish Alliance (N-VA) to split Belgium along linguistic lines, and the risk that long coalition talks could delay spending cuts, nudged up the premium that investors ask to hold Belgian government bonds.

“The party that got the most votes is a separatist party and it throws into question over a long timeframe, over a few years and longer ... who’s going to pay that debt back,” said Peter Chatwell, a strategist at Credit Agricole.

King Albert received outgoing Prime Minister Yves Leterme and accepted his government’s resignation, a formality after Sunday’s vote, as well as the heads of both houses of parliament.

The leaders of both winning parties, N-VA leader Bart De Wever and Elio Di Rupo, the leader of the French-speaking Socialists (PS), went to see the king during the afternoon.

Neither party issued a statement afterwards, however within a few days of the election the king is expected to appoint an “informateur” who will advise him on the shape of the coalition but is not expected to participate in the government.

The N-VA emerged as the strongest party in the Dutch-speaking Flanders region of northern Belgium and won the most votes in the whole of the country of 10.6 million people.

The PS emerged as the second strongest party in Belgium, winning separate voting in the southern, Francophone region of Wallonia.

Di Rupo, who is expected to try to reach an agreement with the separatists, told a press conference: “The PS ... will act in a constructive way to stabilise our country.”

Final results have yet to be confirmed but the N-VA is projected to have 27 seats in the 150-seat lower house of parliament, one more than the PS.

Together with the Flemish socialists, the PS could form the largest group in parliament, meaning PS leader Elio Di Rupo could become the next prime minister.

De Wever said he was ready to give up the premiership if his potential coalition partners agreed to reforms of the state.

“I would gladly offer the post to the Francophone politician who is willing to assume it — of course in the context of great reforms that are needed,” De Wever told a news conference at which he said he wanted to avoid long coalition talks.

TOUGH TALKS AHEAD

French- and Dutch-language newspapers pointed to the tough task De Wever and Di Rupo face in forming a government which will have to bridge ideological differences.

“The question evidently is to know if Bart De Wever is really capable of taking part in a process of negotiation with the Francophones,” the French-language La Libre Belgique wrote.

De Wever, a 39-year-old historian, will want to make good on his promise to devolve more powers to the regions in Belgium, which hosts the headquarters of the European Union and the NATO defence alliance and is a member of both organisations.

But to form a government, he will need to make concessions to woo coalition partners. There is no immediate prospect of Belgium breaking up but French-speaking parties are ready to accept some reforms of how the country is run.

“The situation among the French-speaking parties is today more open to negotiation (than after the last election in 2007), much more open to a reform of the state,” said Pascal Delwitt, a political science professor at Brussels VUB/ULB university.

Lengthy coalition talks could lead to policy paralysis until a government is formed, a concern for investors worried by a sovereign debt crisis among countries that use the euro.

The premium investors demand to hold Belgian 10-year bonds rather than benchmark German Bunds rose a little but there was no signs of a crisis over the election result.

Jacques De Pover, an economist at Dexia, said there was no cause for immediate concern but added: “If in September we see that a government isn’t being formed, if we see the crisis is prolonged, then we could see a market reaction at that time.”

The EU said it was not worried by the strength of Belgium’s commitment to the 27-country bloc and showed no sign of concern that it has no new government two weeks before it takes over the bloc’s presidency for six months.

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