Arab Today, arab today belgium in budget talks
Last Updated : GMT 02:13:09
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Arab Today, arab today

Belgium in budget talks

Arab Today, arab today

Arab Today, arab today Belgium in budget talks

Brussels - AFP

Talks among six parties trying to fix a deficit-cutting budget for Belgium after a crushing credit-rating downgrade could run through the night, party sources said early Saturday. After ratings giant Standard and Poor's downgraded Belgium late Friday, outgoing Prime Minister Yves Leterme called for a deal on its 2012 budget by week-end. Leterme made it clear he feared a rout on markets when they re-open on Monday if feuding Flemish and French-speaking politicians cannot agree a way forward on deep public spending cuts. Leterme set out his 48-hour deadline after ratings giant Standard and Poor's downgraded Belgium status by one notch to AA. Having failed to agree a government 19 months after elections because of in-fighting across the Flemish-French divide and with a debt burden that threatens to crush the economy, Leterme said enough was enough. "It is blindingly obvious, we have to send a very clear signal... preferably before the markets open," Leterme said in a live national television interview, referring to a budget deal and final agreement on a cabinet to take over. His ultimatum came days after Leterme's expected successor, Elio Di Rupo, offered his resignation to Belgium's king, frustrated at the failure of six-party talks to agree a deficit-cutting 2012 budget to avoid EU sanctions. Albert II rejected the resignation and sent him back to work. Sources close to the talks told reporters that the participants were well aware what was at stake. But there was much to be worked through if deep-held differences were to be bridged -- particularly on welfare spending and tax rises, they warned. "The downgrade was expected over the last few days anyway, so it's not a wake-up call," one source told AFP, on condition of anonymity. "It's about making the right choices for this country -- everybody has to be a little bit patient here." The ratings blow underlined a sharp escalation of the debt crisis in a week in which even Germany struggled to raise finance. Concern is growing that the euro currency, in the absence of radical pan-eurozone action, is close to breaking-point. "The ability of authorities to respond to potential economic pressures from inside and outside of Belgium... in our opinion is constrained by the repeated failure of attempts to form a new government," an S&P statement said. After Greek, Portuguese and Irish bailouts, and with Italy, Spain and France now under pressure, it was more bad news for leaders struggling in the absence of a European Central Bank decision to mount a gigantic financial rescue. The European Commission has repeatedly urged Belgium to bring its public deficit below 3.0 percent of GDP by 2012 -- or face a fine of some half a billion euros. Ratings agencies have long warned Belgium that its political soap opera could impact the credit score of a country whose debt is almost as big as its annual national output. S&P's announcement came as Socialist Di Rupo led the latest round of talks among Flemish and Francophone parties struggling to make its sums add up. The parties cannot agree how to trim 11.3 billion euros off the deficit next year and some 20 billion in all by 2015. Centre-right parties want Di Rupo to cut social welfare benefits and state spending rather than raising taxes. Leterme's finance minister, Didier Reynders, blamed the downgrade on a "global loss of confidence" in eurozone public finances. He insisted that Belgium's creditworthiness remained "one of the strongest in Europe." But analysts, who had expected the S&P decision, said the news also had wider significance, two weeks away from a crunch EU summit in Brussels. "Belgium is the symbolic buffer between the eurozone periphery and its core, so this is a sign that the crisis -- slowly, but surely -- is striking at the heart of Europe," Sony Kapoor, head of the Re-Define think tank, told AFP. "It might be a peculiar case because of the divisions between its peoples," he added. "But forget the politics -- it is not the only core country with problematic banks, and that's the key here."

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