Belgium in limbo after government collapses

Belgium's King Albert consulted political leaders yesterday after the government collapsed for the third time in a year following its botched attempt to bail out financial group Fortis.

Prime Minister Yves Leterme tendered his government's resignation on Friday after a report by the Supreme Court found signs of political meddling to sway a court ruling on the future of the bank, a victim of the credit crunch.

The king, who under the constitution must decide whether to accept the resignation, held successive talks at the palace with the heads of the five ruling-coalition parties until 2 a.m. yesterday, a palace spokesman said.

He resumed consultations later yesterday when outgoing Justice Minister Jo Vandeurzen arrived. The presidents of the two houses of parliament were also expected to join.

Leterme has been in office for only nine months. Belgian media said there was little chance he would last any longer.

The prime minister has led a fragile, five-party coalition and failed to resolve disputes between Belgium's linguistic groups that threaten the break-up of the 178-year-old country.

Opposition parties demanded a new parliamentary election, although analysts doubted the parties in Leterme's coalition would want to test voters just as Belgium slips into recession, and with the Fortis debacle fresh in their minds.

Newspaper De Morgen said a reshuffled, emergency cabinet could be stitched together to govern until June. A parliamentary election could take place that month to coincide with planned regional and European elections, the paper said.

Carl Devos, political scientist at Ghent University, said an impending parliamentary investigation into the Fortis debacle would mean Leterme would face the twin challenges of governing and defending himself.

However, there were few obvious alternatives for what he described as a "terrible job" having to deal with Fortis, a financial crisis and lingering tensions over state reform.

Pascal Delwit, an analyst at Universite Libre de Bruxelles, said the most likely solution would be a transitional government until June 2009 when a parliamentary election could be combined with regional and EU votes.

He said the crisis would create further economic problems for Belgium, where gross domestic product is expected to contract in the fourth quarter.

Aside from resolving the saga surrounding Fortis, Belgium's largest private-sector employer, the government needs to push through parliament a deal to boost the economy and has legislation on wages awaiting approval.

"This (political) crisis is terrible for the opportunity to solve or to deal with the economic crisis in Europe and specifically in Belgium," Delwit added.