Elio Di Rupo, leader of the French-speaking Socialists, had attempted to form a government based on a six-party coalition of Dutch and French-speaking Socialists, Liberals and Christian Democrats but there was little common ground on how to make the budget cuts mandated by the European Union.
Parties in the debt-heavy country had sought to save 11.3 billion euros and keep the country’s deficit below 2.8 percent of gross domestic product (GDP), in line with EU rules, but could not agree how to divide the deficit reduction between new taxes and savings.
When the budget talks, which are essential to the formation of a new government, made no progress on Monday, Di Rupo handed in his resignation to the country’s monarch, King Albert II.
The king said he would decide on Di Rupo’s resignation at a later stage.
“The king reminds everyone of the gravity of the current situation and underlines that the defense of the common interest of all Belgians and the European deadlines require a very rapid solution to the political crisis,” the palace said in a statement.
Di Rupo was the latest politician to lead the talks and seemed to have made some progress by securing an agreement on constitutional reform and electoral boundaries in September, a key issue delaying progress until that point.
Di Rupo handed in his resignation once before, in July, when talks over the electoral boundaries collapsed. At that stage the palace did not accept his resignation and talks resumed shortly after.
Belgium has come under market pressure over its lack of a new government and sovereign debt nearly as big as its GDP, with its cost of borrowing increasing steadily. Spreads between Belgian 10-year bonds and benchmark German Bunds rose sharply in November, going above 300 basis points, up from 103 basis points at the start of 2011.
Belgium’s interim government, headed by Yves Leterme, is preparing an emergency budget, based on the 2011 budget.
