IN THE land of Magritte, art scarcely matches the surrealism of Belgian politics. The country has been without a proper government for more than 400 days. Earlier this year people began to worry: citizens staged protests demanding the creation of a coalition; a senator urged spouses of party leaders to deny them sex until a deal was reached; an actor said men should refuse to shave. All to no avail.
More hirsute and loveless than before, perhaps, Belgium’s Walloons and Flemings remain in a stalemate as senseless as the trenches of Flanders, only without the mud and slaughter. In his National Day speech this week, King Albert II deplored the impasse and pleaded for compromise. But he is a monarch without a nation. As one editorialist put it, alluding to Magritte’s nonsensical pipe: Ceci n’est plus un pays (“This is no longer a country”).
On July 21st, just as the king was due to review a military parade in Brussels, European Union leaders were set to meet nearby to try to save the euro. The two crises have parallels: for both Belgium and the single currency, breaking up is no longer unthinkable. Indeed, Belgium might be seen as a microcosm of the EU, with a wealthy, Germanic north fed up with subsidising a poorer, Latin south. If prosperous little Belgium cannot resolve its internal rivalries, say many, what chance for the EU?
To some, though, Belgium holds out hope for Europe. The country manages to function. The rubbish is, mostly, collected. Caretaker ministers have taken contentious decisions, pushing a ban on wearing the burqa in public and going to war in Libya. Even the economy is doing well: growth is higher than the euro-area average and the deficit is narrowing faster than forecast.
Most surprising, perhaps, maddeningly ungovernable Belgium is being held up by many as a model for debt-crippled euro-zone governments. Belgium was once the most indebted country in the EU, with a debt-to-GDP ratio peaking at 134% in 1993. But it steadily reduced that to 84% by 2007. Herman Van Rompuy, now president of the European Council (representing EU leaders), served as budget minister in the early part of this period. If Belgium could lower its debt, Mr Van Rompuy says, so can Greece. Default is unnecessary; sensible reforms can do the trick.
This claim is made by those, both in the IMF and in EU institutions, who want to believe that Greece is still solvent, despite all evidence to the contrary. The latest European Commission report on Greece makes a point of arguing that Belgium ran a primary budget surplus (ie, before interest) almost as large as the one now required of Greece. Such an adjustment, it claims, “although ambitious, is feasible and politically and socially bearable”.
Yet the model may not be so easy to apply. Greece’s debt, at about 160% of GDP, is higher than Belgium’s ever was. Belgium was enjoying steady growth; Greece is in recession. In the 1990s Belgium had its own currency and central bank. Members of the euro zone are like emerging countries, says Paul De Grauwe, of the Catholic University of Leuven: they must borrow in a “foreign” currency whose monetary policy they do not control, and can thus more easily be pushed into default. Belgium also finances itself from its large domestic savings, whereas Greece must borrow heavily abroad; this, says Daniel Gros, director of the Centre for European Policy Studies in Brussels, makes a big difference. Domestic creditors can be taxed; repaying one’s own citizens is easier to do than handing large sums over to foreigners.
In any case Belgium is by no means out of the woods. It may not be Greece, but it could easily be the next Italy. After all Italy also has a high savings rate, and it even enjoys a primary surplus, but it was not spared market contagion. Belgium’s debt remains high. Spreads on Belgian bonds over their German equivalents are widening. The caretaker government may be unable to enact big spending plans, but nor can it make labour-market reforms that are sorely needed. Some rating agencies mutter that Belgium’s debt could be downgraded if the deadlock is not resolved.
Yet Belgian politicians are stuck in endless talks-about-talks. The principal obstacle is Bart De Wever, leader of the Flemish nationalist party N-VA, who surprised all by becoming the biggest winner of the 2010 election. A beer-bellied historian and a lover of Cicero, Mr De Wever is a respectable sort of separatist. He says he does not seek immediate secession but wants the Belgian federal shell gradually to dissolve into the EU. He has a vision not only of Flemish emancipation but of economic liberty: Flanders should be permitted to develop a liberal economy less burdened by Walloon demands for social transfers.
Mr De Wever has so far rejected all offers of compromise. His intransigence seems only to be increasing his popularity. Others could form a government without him, but the once-dominant Flemish Christian Democrats have not dared cut a separate deal for fear of being outflanked. Abroad, Mr De Wever is getting attention: he was recently invited to London for talks with the British prime minister, David Cameron.
The longer this paralysis continues, the easier it may be for Belgians to conceive of national divorce. But there are good reasons to keep the unhappy marriage going. Who would get custody of Brussels? This French-speaking city surrounded by Flanders generates wealth for all, not least because of its EU institutions. And who would take on Belgium’s vast debt?
Here, indeed, Europe’s debt crisis might just create an opening. The instability of the euro area now makes a break-up riskier. Fear of contagion may be pushing Christian Democrats to start serious talks. If the markets turn on Belgium, will the Flemish bourgeoisie see Mr De Wever as a man of principle or a chancer? Markets may yet succeed where King Albert has failed. Surreal.
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