Belgium names Leterme PM to end 9-month deadlock

BRUSSELS Thu Mar 20, 2008 2:09pm GMT

Belgium's outgoing Prime Minister Guy Verhofstadt (L) presides over his last Cabinet meeting, before stepping down, with his successor Yves Leterme (R) in Brussels March 20, 2008. REUTERS/Thierry Roge

Belgium's outgoing Prime Minister Guy Verhofstadt (L) presides over his last Cabinet meeting, before stepping down, with his successor Yves Leterme (R) in Brussels March 20, 2008.

Credit: Reuters/Thierry Roge

Related Topics

BRUSSELS (Reuters) - Flemish Christian Democrat Yves Leterme took over as Belgian prime minister on Thursday, ending nine months of deadlock that had prompted speculation the country could break apart.

But members of the new government are expected to resume battle soon over devolution of powers to the regions.

King Albert accepted the resignation of interim Prime Minister Guy Verhofstadt before swearing in Leterme and his 14 other cabinet members. Didier Reynders stays on as finance minister and Karel De Gucht retains the foreign ministry.

Leterme, former premier of Dutch-speaking Flanders, will head a five-party government after Dutch- and French-speaking parties ended their post-election squabbling over devolution.

Political analysts predict however that tension will resurface in the next months over Flemish demands for more power to be given to the regions, which French-speaking parties oppose.

The government, which is expected to pass a vote of confidence on Saturday, has set a July deadline for a major reform of the state.

Verhofstadt, who has led the country since 1999, was reappointed at the end of December after Leterme twice failed to form a government following June parliamentary elections.

Verhofstadt said then he would stay on only until March to settle a 2008 budget and an initial deal on state reform.

SHORT-LIVED?

The five parties entering government agreed earlier this week on a programme including a plan to create 200,000 jobs and to achieve a budget surplus by next year and one of at least one percent of gross domestic product by 2011.

Analysts question whether the government will last that long.

"There's a deadline of the end of July to have a second phase of state reform... It means it's really another interim government," said Carl Devos, political analyst at Ghent University.

Pascal Delwit, analyst at the French-speaking Brussels Free University, said it was easy to imagine a new federal election at the same time as the planned regional vote in 2009, with campaigning starting as early as this September.

"Since 1945, no government made up of the three traditional political families has lasted its whole term," he said.

Business has welcomed the prospect of a fully fledged government, saying it is good for Belgium's image abroad, particularly to would-be foreign investors.

"With the current turmoil and economic uncertainty, it is vital to have a government in place," said Jacques De Pover, economist at Dexia.

The political stalemate sent investors scurrying out of the country's debt. The spread between yields on Belgian government bonds and those on benchmark German bunds have soared, although mainly due to the credit crisis.

De Pover said politics probably explained about 10-15 basis points of the current 10 year spread of 43 points.

Leterme will also have his work cut out to win over disenchanted voters, particularly those in the French-speaking part of the country whom he has upset with apparent gaffes, such as saying they may not be smart enough to learn Dutch.

(Additional reporting by Ingrid Melander, Julien Ponthus)

(Editing by Giles Elgood)

FILED UNDER: