BRUSSELS - The man likely to be Belgium's next leader broke almost 500 days of political deadlock Tuesday, announcing far-reaching legal reforms to grant more autonomy to the country's Dutch and French-speaking regions and defuse their endless bickering.
The agreement appears to pave the way toward the formation of a new government led by Elio di Rupo, a French-speaking socialist, a development that comes amid growing concerns Belgium's financial health.
"The Belgium of today will differ greatly from the Belgium of tomorrow" if the constitutional reforms, backed by leader of eight political parties, can be enacted, di Rupo said. He said the deal came "in response to the deep-seated aspirations for change," notably in the Dutch-speaking region of Belgium.
Di Rupo also said it was urgent to draft a 2012 budget and focus on the eurozone crisis, which this week caused the demise of the Dexia Belgium bank. It was nationalized at a cost of C4 billion which will raise the country's public debt by one point to 98 per cent of GDP.
Belgium has come under increasing pressure from markets because it does not have a goverment able to undertake long-term planning. Last week, Moody's Investors Service said it was placing Belgium's Aa1 ratings on review for possible downgrade.
Bickering between Dutch and French-speaking parties have prevented the formation of a government since elections that were held on June 13, 2010.
The government talks have been blocked by fundamental differences over Belgium's future. In 485 days of stalemate since the 2010 elections, 11 different politicians have tried to cobble together a coalition government. Until a new government is in place, the outgoing coalition of Christian Democrats, Liberals and Socialists will stay on as a caretaker government.
At the heart of the debate lies a desire for more autonomy -- and even independence -- in Dutch-speaking Flanders, Belgium's economically more powerful and populous northern half, despite five rounds of reform since 1970 that have led to significant regional autonomy.
A breakup of the country is a nightmare scenario in Francophone Wallonia, whose politicians compromised greatly by agreeing to another round of constitutional reform.
Di Rupo said the sixth round will be the most drastic to date. It will shift revenue-raising powers from the central government to the regional governments of Flanders, Wallonia and Brussels, the officially bilingual but overwhelmingly Francophone capital. The regions will also get more self-rule, notably in child allowances, labour market policies, elderly care -- and even in setting their own highway speed limits.
The federal government will remain responsible for a few key areas such as foreign policy, defence, social security and the national railways.
Crucially, Di Rupo managed to get agreement on carving up a Brussels-area voting district that gives special rights to French speakers in the capital's Dutch-speaking suburbs.
That issue has long been a flash point of linguistic strife and helped the independence-minded New Flemish Alliance become Belgium's biggest political party in the June, 2010, elections. It was that party's stated goal -- an orderly breakup of Belgium -- that galvanized eight other parties to agree on new constitutional reforms.
