Waiting for Di Rupo, De Croo or Godot?

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The Belgian long-term interest reached 5.75% yesterday. At that time Open VLD president Alexander De Croo was in a meeting with formateur Elio Di Rupo PS to make a final effort to reach a government agreement. Both were tight-lipped about the content, the result and even about the location of the meeting. On Wednesday King Albert II asked Di Rupo to stay on board after he tendered his resignation, but Di Rupo  said that he needed time to think it over. Last night he was still in talks with some of the negotiators, who find Open VLD’s unremitting stance increasingly hard to understand. Various parties reportedly tabled new proposals yesterday. At this stage failure is no option, especially in view of the volatility on the markets as a result of the political deadlock. In an effort to stabilise markets, resigning Premier Yves Leterme yesterday announced a number of budgetary measures in Parliament. To ensure a balanced account for 2011, 250 million in nuclear interest was booked. Next year new banking and pharmaceutical taxes will raise additionally 660 million euros. Leterme also used the opportunity to promote the sovereign debt notes issued on 4 December, which the government sees as a vehicle for public debt financing. Earlier in the day CDH referred to the purchase of these notes as “a patriotic gesture”. It seems the publicity was effective given that the Debt Agency and the banks KBC and BNP Paribas noticed more interest during the first registration yesterday than during the entire issuing period for the previous notes. At this stage Leterme’s preliminary budget shows a deficit of 4.6% compared to Europe’s insistence on 2.8%. A government of current affairs is however not in a position to implement any structural savings, even though the liberals have insisted to make the necessary cuts. As a matter of fact Budget Minister Guy Vanhengel Open VLD has given Leterme a list of measures that must save in the region of 7 billion euros and reduce the deficit to 3.8%. Finance Minister Didier Reynders MR wants to increase savings to as much as 10 billion through “the implementation of all the measures which Di Rupo managed to reach an agreement on”. But State Secretary for the Budget Melchior Wathelet CDH and Social Affairs Minister Laurette Onkelinx PS have vetoed the implementation of these measures concerning 2012 in order to put pressure on the negotiations for a new government.

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