Flemish Nationalists Expand Base Across Belgium’s North

Flemish nationalist leader Bart De Wever urged a restructuring of Belgian’s federal state on Sunday after his party won the local elections in the Dutch-speaking north of the country. He demanded that Prime Minister Elio Di Rupo, a Walloon socialist, opened negotiations “to enable both Flanders and Wallonia to look after their own affairs.”

De Wever’s national conservatives emerged as the largest party from the 2010 general election but didn’t join Di Rupo’s government. They boosted their support in Flanders on Sunday at the expense of mainstream right-wing parties but especially the separatist Vlaams Belang which has been barred from local and national government by the remaining political parties. Read more “Flemish Nationalists Expand Base Across Belgium’s North”

Belgian Government Takes Office, Credit Rating Cut

Less than two weeks after Walloon socialist leader Elio Di Rupo unveiled his cabinet and became Belgium’s first French-speaking prime minister in more than thirty years, the Moody’s rating agency called into question the nation’s creditworthiness with a two notch downgrade.

Belgium is one of the most heavily indebted countries in the world with a sovereign debt that’s almost the size of its yearly economic output.

Moody’s said to be more concerned about the lack of solid growth forecasts for Belgium and the threat of Europe’s debt crisis engulfing the nation of eleven million. “The fragility of the sovereign debt markets (in the eurozone) is increasingly entrenched and unlikely to be reversed in the near future,” according to the agency.

The new rating has a negative outlook which means that another downgrade is possible in a couple of years. Read more “Belgian Government Takes Office, Credit Rating Cut”

Belgium Struggles to Form New Government

King Albert asked chief negotiator Elio Di Rupo to continue leading talks to form a government on Wednesday almost a year and a half after Belgians elect a new federal parliament.

With economic growth stalling, Belgium could face European sanctions as early as next month for failing to tackle its deficit which is projected to widen next year from an estimated 3.6 percent in 2011 to 4.6 percent of GDP.

Walloon socialist leader Elio Di Rupo had resigned from leading the negotiations to form a government on Monday after six party talks to hammer out a reform budget that would reduce the deficit to less than 3 percent of gross domestic product fall apart. The northern liberal party argued that Di Rupo’s proposal didn’t cut spending deep enough, relying on tax hikes instead to aim for a balanced budget.

Since last year’s elections, Dutch and French-speaking political parties in Belgium haven’t managed to form a government. Flemish nationalist and Walloon socialists, the largest parties in their respective parts of the country, couldn’t come to an agreement last year and the former have been excluded from coalition talks since January.

Current negotiations include Christian Democrats, Green parties, liberals and socialists from the Dutch-speaking north and the French-speaking south of Belgium. Northerners, who account for almost 60 percent of Belgium’s economy, want more autonomy from the poorer south where Walloons tend to vote overwhelmingly socialist.

Caretaker prime minister Yves Leterme, leader of the Flemish Christian Democrats, announced in September that he would leave his post before the end of the year to become deputy secretary general of the Organization for Economic Cooperation and Development. His government is not empowered to implement necessary economic reforms in the meantime.

With little hope of a ruling coalition coming together soon, Belgian borrowing costs are mounting. There is fear that Europe’s sovereign debt crisis could spread to Belgium which is already among the most heavily indebted countries in the world.

Government spending accounts for almost 50 percent of GDP so Belgium’s ability to borrow cheaply is crucial. The country was able to recover from the global downturn with modest growth rates last year but stimulus measures and subsidies have taken a heavy toll on public finances. Corporate and income taxes in Belgium are high and labor codes are stringent. A broad coalition of left- and right-wing parties seems unlikely to address these long-term impediments.

New elections wouldn’t help to create a more stable majority. Opinion polls suggest that the outcome could be the same as last year’s vote.

Bank Bailout Invites Scrutiny of Belgian Credit Risk

The Franco-German rescue of investment bank Dexia adds to mounting concern about Belgium’s creditworthiness. The dire state of Belgian public finances is compounded by a yearlong political gridlock that has left the country without a proper government since elections last summer.

The nationalization of part of the Dexia bank will cost Belgian taxpayers €4 billion immediately. This adds to the country’s national debt which is almost the size of Belgium’s entire gross domestic product. As such, it’s the third most heavily indebted nation in the eurozone, after Greece and Italy.

On top of the €4 billion, Belgium has pledged guarantees worth up to €54 billion for the remainder of Dexia which has been separated into a nationalized consumer bank and a market investment bank by the governments of Belgium, France and Luxembourg.

The three major American credit rating agencies have warned that the lack of political consensus in Belgium and the expensive Dexia bailout could prompt them to lower Belgium’s credit rating. Belgian credit is rated AA+ by Fitch and Standard and Poor’s with a negative outlook. Moody’s maintains an AA1 rating and changed its outlook to negative on Friday.

Since last year’s parliamentary elections, Dutch and French-speaking political parties in Belgium haven’t managed to form a federal government. The major parties — Flemish nationalist and Walloon socialists — have found very little common ground. The Flemish north, which accounts for roughly 60 percent of Belgian GDP, wants more autonomy from the poorer south where Walloons tend to vote overwhelmingly socialist.

Government spending in Belgium is almost 50 percent of GDP so its ability to borrow cheaply is crucial. The country was able to recover from the global downturn with modest growth rates last year but stimulus measures and subsidies have taken a heavy toll on public finances. Corporate and income taxes in Belgium are high and labor codes are stringent. A national government composed of conservative separatists and socialists is unlikely to address these long-term impediments.

In Belgium, Still No Government in Sight

After numerous rounds of negotiations between the victors of this summer’s federal elections, Belgium is still without a government. The two major parties, the Flemish nationalists and the French-speaking socialists, have been gridlocked for months. Unless they manage to find common ground in the weeks ahead, the country may have to call another election.

No one likes the prospect of new elections as they are likely to strengthen each of the largest parties in the two language areas of Belgium, rendering future compromise nigh impossible. The New Flemish Alliance, which favors gradual secession of the Dutch-speaking part of the country, has been adamant so far in demanding increased autonomy for the region. Walloon socialist leader Elio Di Rupo previously offered the Flemish financial reform, including a transfer of competences from federal to regional governments worth some €15 billion. But the nationalist balked at parallel requests to give Brussels — an independent, bilingual region within Flanders of which the population is largely French speaking — a fixed subsidy of €250 million to alleviate part of its massive debt burden.

The compromise agreement currently under consideration entails a further transfer of authority over health-care policy and labor law from the federal government to the regional entities. Public finances are among the most hotly contended issues as the Flemish allege that they have been paying for Wallonia’s prosperity in recent years.

Whereas Flanders is the economic powerhouse of Belgium, the south remains impoverished and subject to high unemployment rates. With the socialists in power, the Walloons nevertheless enjoy a welfare state for which the Flemish say they are footing the bill.

The trend will probably reverse in the year ahead. Economic growth is expected to stall in Flanders while the French-speaking south will see modest expansion.

The lack of political stability may well harm Belgium’s credit rating in the near future. As one of the most highly indebted countries in Europe with government spending equaling almost 50 percent of GDP, Belgium’s ability to borrow is pivotal. The country has been able to recover from the global downturn with modest growth rates last year but stimulus measures and subsidies have taken a heavy toll on public finances. Corporate and income taxes in Belgium are high and labor codes are stringent. A national government composed of regional conservatives on the one hand and socialists on the other is unlikely to address these long-term impediments however.

Political Deadlock in Belgium and Holland

Nearly three months after both Northwestern European states held their parliamentary elections, Belgium and the Netherlands are still without a government. This week, in both countries, negotiations over a new ruling coalition broke down, leaving neither with a clear political resolution for the foreseeable future.

June’s incredibly close elections in the Netherlands decimated the traditional ruling party, the Christian Democrats, while providing neither the right nor the left with a clear majority. The liberal party, which came out largest by just one seat compared to Labor, has spearheaded the negotiations for a new government up until now, attempting, most recently, to come to a coalition with both Christian Democrats and Geert Wilders’ Freedom Party. Wilders is widely condemned on the political left for his Islamophobic, anti-immigration rhetoric but has fared well in recent years, more than doubling his seats in parliament in the last election.

Although much of Wilders’ support, particularly in the south of the country, comes from Christian Democrat voters, several conservative party leaders, among them three former prime ministers, have objected to the notion of governing with his platform in recent weeks. Former health secretary and current number two in the party, Ab Klink, channeled their concerns and persuaded two fellow parliamentarians to block the negotiations. Party leader Maxime Verhagen, simultaneously serving as caretaker foreign minister, ultimately managed to restore unity in his faction but lost Wilders’ confidence in the process.

Liberal party leader and likely future prime minister Mark Rutte has proposed to pin down a coalition agreement himself now and seek support from other parties later. The notion is not without precedent. Wim Kok, before he became prime minister for the Labor Party in 1994, attempted a similar method and was successful in forming the country’s first Purple coalition, bringing together social democrats and liberals in a single government. It depends on the recommendations of other party leaders and Queen Beatrix whether Rutte gets his way or another, conventional round of negotiations follows first.

In either event, amassing sufficient support for a majority government under liberal leadership will prove difficult to accomplish. Few of the parties on the left, which together hold about half of the votes in parliament, are willing to implement the liberals’ rigorous spending cuts on health care and social security. Each day that the country remains without a government, the Netherlands’ public debt mounts with some €100 million. The next government, the liberals say, has to find some €18 billion in permanent spending cuts on a budget that equals more than 45 percent of GDP.

In Belgium the political uncertainty is all the greater. June’s elections there brought Flemish nationalists to power who are demanding greater autonomy for the northern, Dutch-speaking part of the country. Compared to Flanders, southern, French-speaking Wallonia is relatively backward. Unemployment is twice that of Flanders while the region is responsible for but a third of Belgium’s total economic output.

While in Flanders, the political right — the nationalists and Christian Democrats — won the elections, in Wallonia, the socialists are in the majority. These two camps, supplemented with smaller parties from the center, have to reach an agreement on the federal level to form a new government.

Socialist leader and chief negotiator Elio Di Rupo offered the Flemish significant financial reform, including a transfer of competences from federal to regional governments worth some €15 billion. “All conditions were there for the center of gravity to shift from the federal state to the federated entities,” he declared. But the nationalist balked at parallel requests to give Brussels — an independent, bilingual region within Flanders of which the population is largely French speaking — a fixed subsidy of €250 million to alleviate part of its massive debt burden.

Di Rupo finally tendered his resignation as negotiator with King Albert II on Friday after several attempts to reach a compromise failed, complaining, in a press conference, that “not all Dutch-speaking politicians understand the sensitivities of the French speaking. They will not approve of an accord that heralds the impoverishment of Brussels and Wallonia,” he predicted. The Flemish, on the other hand, are largely tired of effectively subsidizing their southern neighbors for their lack of productivity. Any new administration will have to enact major legal and financial reform to further separate the two nations but with the political landscape so starkly divided, it seems unlikely that a government composed for a multitude of parties will have the mandate to do so.

Among the Dutch, the notion that Flanders should, once again, become part of the Netherlands is widely entertained these days. Modern day Belgium was part of the Netherlands between 1815 and 1839 when its secession was recognized in the Treaty of London. The Flemish now have reason to retort that their neighbors ought to get their own house in order before contemplating such schemes of reunion.

Flanders Favors Nationalist Newcomer

Elections in Belgium on Sunday are set to push the conservative New Flemish Alliance (N-VA) to the forefront of federal politics. The party that promotes the secession of Flanders won nearly a third of the vote in the Dutch-speaking northern part of the country. In the south, the socialists were on the rise, winning more than 40 percent of the vote in French-speaking Wallonia. In spite of losing slightly in Flanders, the socialists are expected to deliver the next prime minister.

Prime Minister Yves Leterme’s second government, formed by a coalition of five parties, including conservatives, liberals and socialists, collapsed last April, tumbling the country into yet another round of political uncertainty. Belgium has had three different governments since the end of 2008, two of which were chaired by Leterme.

After the last cabinet tendered its resignation, many voters on the right evidently switched to N-VA which was founded in 2001 and is running for parliament independently for the first time in this election. The conservative party, traditionally dominant in Flanders, lost over 10 percent of its share of the vote. The right-wing Vlaams Belang, infamous for its staunch positions on immigration, lost over a third of its 2007 votes to N-VA.

Tensions between north and south have grown evermore fierce in recent years up, sometimes culminating in downright hostility. Flanders is the economic powerhouse of Belgium while Wallonia remains impoverished and plagued by unemployment. With the socialists in power there, the Walloons enjoy a welfare state for which the Flemish say they are footing the bill.

N-VA promises greater autonomy for Flanders and would ultimately like to see it separate from the French-speaking south. The Walloons on the other hand want Flanders to surrender a largely French-speaking district that surrounds the capital of Brussels to their control. Unsurprisingly, Belgian media are wondering about their country’s very future these days.

A federal government formed by N-VA, conservatives and socialists appears likely at this stage. Such a coalition already governs in Flanders in spite of significant differences in opinion about economics and Belgium’s political future. The negotiations that should lead to the formation of a new government will probably drag on for many months. The last formation took almost two hundred days.