Deadlock over Belgian gov't may be ended by May

Analysts see N-VA separatist party's threat to withdraw from talks as a sign that government deadlock may break soon

A threat by Flemish separatists to withdraw from talks on forming a new Belgian government has increased the prospects of a coalition being formed as early as May.
Political parties in Belgium have been trying to form a coalition for 268 days, making it the longest time any European country has been without a new government after elections. The impasse exceeds Iraq's efforts to form a government in 2010.
"We could maybe have a government for the Easter holidays," Michel Hermans, a professor at the University of Liege, said.
More than half a dozen rival French- and Dutch-speaking political parties have been holding on-off talks since elections were held last June, but have made little progress.
N-VA, the Flemish separatist party that won the most seats, issued an ultimatum at the weekend saying it would withdraw from the talks if a deal on several vital points had not been reached by the end of April.
Political analysts see the threat as a sign the deadlock is close to be being broken -- whether that means N-VA ends up in coalition or steps aside, making it easier for other parties to form a government without them.
"I think the process is accelerating, either we will find a solution with the N-VA and that will be within two months, or we won't and it will be soon after their departure," Hermans said.
The ultimatum from the party, which has as its goal the eventual dissolution of Belgium, is likely to galvanise other Dutch-speaking parties into reaching an agreement, analysts said, or will clear the way for a deal without them.
The deepening political uncertainty has prompted ratings agency Standard & Poor's to lower Belgium's credit outlook, saying it could downgrade the country's debt if a government is not formed by June.
The deadlock has caused reverberations in financial markets, with yields on Belgian debt pushed higher, reflecting perceptions of increased country risk. Belgium has debts equal to about 98 percent of its annual economic output of about 330 billion euros ($460 billion).
While N-VA's withdrawal from the talks might speed up the process of forming a new government, it also could increase the likelihood of new elections having to be held if it still proves impossible to strike a deal among around eight parties.
Peter Vanden Houte, chief economist at ING Belgium, said that if Belgium were forced to hold a new round of elections, financial markets would become agitated again.
"The only factor that would really create concern is if we were to head for new elections. It would dissolve parliament and no more decisions could be made," he said, pointing out that it would be very difficult to pass critical fiscal legislation.
SEPARATISTS DISTANCE THEMSELVES
Carl Devos, a professor of politics at the University of Ghent, thinks the N-VA will end up stepping back from the talks, meaning a government could be formed without the separatist party in the next six to eight weeks.
"It could be that it will not be the end of April, it could be the beginning of May or (half way through) May," he said.
For the N-VA, the political calculation appears to be that it will be easier to hold on to its separatist ambitions -- and its core voters -- if it doesn't compromise in the negotiations.
It also may be calculating that if it withdraws and the other parties fail to form a coalition, that would lead to new elections at which the N-VA could improve its standing.
As well as the need to put aside their differences and forge a coalition, the problem for the remaining political parties will be one of legitimacy -- how do you form a functioning coalition without the largest party in the parliament?
"Politically, how can you say to the people that you make a government without the winner of the election in Flanders -- that will be more difficult," Devos said.
The main bone of contention in the dispute between Dutch-speaking and French-speaking parties is the overhaul of the Belgian constitution.
Flemish parties want their region to be able increasingly to raise its own taxes and end what they see as a dependency culture in the poorer region of Wallonia, where the unemployment level is twice that of Flanders and tax receipts are far lower.
There also is disagreement over the future of Brussels and its surrounding regions, where Dutch speakers fear that a further influx of French speakers will diminish the political clout of Flanders in the longer term.