Belgian leaders agree on federal budget

After 18 months of no government and debt downgrade, political parties agree to implement austerity cuts.

    Di Rupo of the Socialist party has been asked to form a cabinet, after 18 months of no formal government [EPA]

    A 19-month political feud between Belgium's political leaders had ended with a budget deal that met the European Union structure a day after a debt downgrade.

    The budget envisages a fall in Belgium's public deficit to 2.8 per cent of gross domestic product (GDP) in 2012.

    "There is an agreement," the spokesperson for Elio Di Rupo, the French-speaking Socialist premier-to-be, told the AFP news agency.

    Di Rupo had been trying to form a government based on a six-party coalition. But he tendered his resignation on Monday after talks for the 2012 budget - agreement on which is a condition for forming a government - ground to a halt.

    King Albert II, who had stepped in throughout negotiations to soothe tempers and urge politicians to find agreement to end 18 months without a formal government.

    "As a next step, he has asked the chief negotiator to form a government as quickly as possible," the palace said in a statement.

    Balanced budgets

    Negotiators for the six parties involved said the deal "meets Belgium's commitments to the European Union."

    The budget is expected to take in the suggestion that 2012 could unleash a significant recession despite milder predictions, but the budget haspredicted that Belgium would return to having a balanced budget in 2015.

    But in order to get there, Belgium has had to agree to "long-term  structural reforms" of the sort imposed on Greece, Italy and other euro countries, meaning early-retirement options will disappear in a generational change over the coming years.

    Friday's ratings blow, after Greek, Portuguese and Irish bailouts, and with Italy, Spain and France also now under pressure, underlined a sharp escalation of the debt crisis at the end of a week that even saw Germany struggle to raise funds.

    Concern has grown rapidly that the euro currency, in the absence of a game-changing European Central Bank decision to mount a gigantic financial rescue, could be close to breaking point.

    SOURCE: Agencies


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