Bailouts Bring Belgium Together--Temporarily

Yves Leterme

LONDON - Belgium is a country divided into French and Dutch halves, and led by a fragile five-party coalition and a prime minister so embattled that he tried to quit only four months into the job. So it was somewhat surprising to see the Belgian government act with speed and unity this week to save the country's biggest financial institutions, Fortis and Dexia, injecting a total of 7.7 billion euros ($10.8 billion) into both.

Of course, Belgium did not act alone: governments in Luxembourg and the Netherlands also signed up for the 49.0% nationalization of Fortis (other-otc: FORSY - news - people ) over the weekend, while on Tuesday the French government and Luxembourg joined in for a comparatively smaller share of Dexia (other-otc: DXBGF - news - people ). (See "Dexia Next To Submit To Bailout.") But Belgium stumped up the most capital in both cases, and the sheer decisiveness of the action actually made the country look strong--not bad, considering commentators were predicting the disintegration of Belgium only a few months ago.

"People really are quite impressed by the quick and firm decisions taken by the federal government, especially the coordination and leadership of [prime minister] Yves Leterme," said Carl Devos, a political analyst at the Dutch-speaking University of Ghent. "We have portrayed Leterme over the past few months as a weak leader. Maybe that has not all changed, but in this crisis he has shown firm leadership. He has done what a leader needs to do."

Flemish Christian Democrat Yves Leterme has had a rocky career so far this year, as a controversial debate over regional autonomy threatens to push Belgium to the brink of disintegration. Dutch-speaking Flanders wants more political and fiscal autonomy, while the more economically sluggish French-speaking Wallonia is reluctant to give it; however, recognizing that the stability of the country is at stake, parties do seem set to begin key talks on federal reform.

But according to Ghent University's Devos, Leterme will have trouble maintaining the honeymoon image of his strong leadership. The government will be under pressure to balance the budget when it announces spending plans on Oct. 14, which could mean raising more taxes. And after that, Belgium's political parties will be gearing up for the regional elections slated for June of next year, which ultimately will come too soon for Leterme to have a good chance of surviving.

"What has happened to our country in the last year has been so tough, so hard and so ugly that there is absolutely no trust between the two parties," said Devos. "Even a minor incident will be enough to make the federal government fall."