Belgium enters crunch talks after poll shock

Right-wing Flemish separatists and left-wing francophone unionists began tortuous negotiations yesterday to resolve federal Belgium's future and its finances.

As markets sensed weakness at the heart of debt-laden Europe following Sunday's sea-change elections, observers doubted whether deep ideological chasms - linguistic, political and economic - could be bridged in Brussels over coming months.

King Albert II took the first steps by meeting outgoing caretaker prime minister Yves Leterme and subsequently the vote's shock victor, 39-year-old republican New Flemish Alliance chief Bart De Wever.

The latter - who turned up at the palace without wearing a tie - ultimately wants independence for Belgium's Dutch-speaking majority in affluent Flanders, and in the first instance, full fiscal control.

Later on, the King also hosted the Socialist leader of the French-speaking Walloon minority, Elio Di Rupo.

Openly homosexual, Mr Rupo is the favourite to become prime minister - which would make him the first francophone to hold the post since the 1970s - after Mr De Wever indicated he would not be a candidate.

As voters digested Flemish demands to re-draw state powers and media wondered whether any kind of compromise could be reached, the country faced an uncertain future.

While the Flemish want only the loosest of ties to be retained at federal level, much of the fighting will revolve around the state finances.

In Overijse, an NVA stronghold near Brussels where municipal authorities did deals with property agents to keep francophones out, Flemish voters said people "no longer want a large part of their money to go to Wallonia", according to Dutch speaker Eliane Bergiers.

Francine Beyens, a retired French teacher, says she has detected "animosity going back years" in Overijse and that French-speakers have been driven out by wealthier Flemish-speakers.

"There are fewer of us, simply because we have less money," she said.

Mr De Wever's party tapped successfully into Flemish concerns, although leaders in poorer, southern Wallonia are expected to fight hard for a shared welfare state to be retained.

Belgium has had four governments and three prime ministers since its last general election in 2007.

And the search for a coalition deal that could avoid a definitive split - which could set a precedent for other independence-minded European regions from Scotland to Catalonia - is unlikely to be straightforward.

"If our country stays several months without a government, our credit rating will suffer," warned Paul Soete, head of Belgium's technology employers federation Agoria, fearing that bond yields could rise sharply as in Greece or Spain.

There was an increase yesterday, but Frankfurt-based Goldman Sachs economist Erik Nielsen suggested much would depend on how Mr De Wever plays the hand he has been given.

The full effect of the NVA's win "needs to be watched carefully," he said, pointing out that the federal state's financing needs "are among the largest in Europe this year and next."

Parallel polls combine to produce countrywide results in Belgium, with parliamentary arithmetic making cross-language deals inevitable.

Official results confirmed that Mr De Wever's party won the largest number of seats, 27 in the 150-member lower Belgian federal house, with the largest share of the vote in Flanders - 28.2 per cent.

The Socialists secured 26 seats, with 36.6 per cent of the vote across Wallonia and the third federal region of Brussels, well ahead of Mr Leterme's Christian Democrats, who picked up 17 seats on 17.6 per cent.

After a disappointing showing for his francophone liberals, outgoing finance minister Didier Reynders will quit as party chief once a new coalition is installed, local media also reported.

Mr Leterme retains control of day-to-day affairs - and is firmly expected to take Belgium's lead when it assumes the European Union's six-month rotating presidency on July 1.