A dramatic turn in the Belgian political crisis

by Ingrid Robeyns on December 22, 2008

Ever since the last elections in Belgium, in June 2007, there have been events and background conditions, which have led to a political crisis. We’ve discussed that ongoing crisis here at CT at length (one two three four five six). So it is super-ironic that the Belgian government fell last Friday, not because of the communautarian tensions, but because of a chain of events that is linked to the global financial crisis.

What happened? When several banks got into acute problems due to the credit crisis, Fortis, a Belgian-Dutch bank, was saved by the intervention of the Dutch and Belgian governments. Fortis was split in a Belgian and a Dutch part. The Belgian government said from the beginning that she would only support the bank temporarily, and would sell it as soon as appropriate. The major French bank BNP Paribas and the Belgian government struck a deal in October. Yet a Belgian court ruled that that deal had to be suspended for 65 days since the Belgian government would not have given adequate consideration to the interests of the Fortis shareholders, who have seen an almost complete collapse of the value of their Fortis-shares. There are strong indications that members of the Belgian government, including most prominently the prime minister Yves Leterme, tried to influence the courts ruling so that the deal with BNP Paribas could go ahead.

So now there are two sets of problems. On the one hand there are allegations that the government has tried to meddle in the independent judgements of the Courts – something that some commentators have labelled as unprecedented. On the other hand there is now an acute political crisis on top of the deeper and more structural crisis. The chaos and instability have reached a new record: it was already almost impossible to form a government before the financial crisis hit Europe, and there is no reason to think it is now going to be any easier. There is the appealing option to hold elections next June, when the elections for regional governments are scheduled to take place – but there remains the concern that those elections would not be constitutional as long as the problem of Brussels-Halle-Vilvoorde is not solved (yet some politicians dispute the claim that such elections would be unconstitutional, as long as the majority of the newly elected parliament would ex-post backup the election outcome).

I was in India last week (at this conference), so only had access to internetsites to stay informed. Hence those of you who’ve been able to watch Belgian news, read the local newspapers and listen to the radio are warmly invited to complement and/or correct me in the comments section.

{ 11 comments }

1

MH 12.22.08 at 5:27 pm

Judging the ratio of comments, a $2.99 price difference at Amazon is infinitely more interesting then the health of the Belgian polity.

2

Hektor Bim 12.22.08 at 7:41 pm

Two reasons for this:

(1) No one expects war or even great inconvenience if Belgium breaks up. Which might be a mistake…

(2) Everyone is sick to death of hearing about it. It’s like waiting for a long-lived, unpleasant relative who everyone has gotten tired of to die.

3

John Quiggin 12.22.08 at 7:42 pm

More precisely, the cost of acquiring postable information about Amazon prices is infinitely less than the cost of finding out something about the Belgian political crisis that Ingrid doesn’t already know.

My immediate reaction would have been that, by making the cost of not having a government higher, the financial crisis would be more likely to lead to some kind of resolution, and that the court finding would also increase the demand for a government that could push through legislation if needed. But that’s based on first principles rather than any understanding of the actual situation. So, a couple of questions.

Is there any regional difference in the economic impact of the crisis so far? For example, was Fortis more associated in terms of ownership, management and deposits with one language group?

Also, are the parties split on left-right as well as linguistic grounds? I seem to recall that they are. Perhaps this divide will have renewed salience in the future.

4

virgil xenophon 12.22.08 at 7:59 pm

Isn’t multi-culturalism wonderful?

5

Ingrid Robeyns 12.22.08 at 8:21 pm

Very good question re: the Fortis ownership, John, but frankly I don’t know the answer. One would expect, based on the general fact that Flemish are significantly better off than Belgians living in the Walloon area or in Brussels, that they will be harder hit by the collapse of Fortis. But this is ‘reasoned speculation’ rather than based on facts (these details one is more likely to find out from radio or television interviews or lengthier newspaper or magazine articles, and I haven’t had access to these. Right now the newspapers are all speculating about the composition of the new government).

6

Ingrid Robeyns 12.22.08 at 8:32 pm

Hektor Bim, where are you based, geographically speaking? I think for Belgians or those living in Belgium it must be clear that splitting up is an extremely complicated and highly inconvenient process. To mention just one obvious reason, Brussels is geographically speaking an enclave in Flanders but the majority of people living there speak French, not Dutch/Flemish.

Also, what you now have in Belgium is not just increasing instability and chaos, but also the increasing price that comes with it. Right now what any country needs is a government capable of doing what is needed (and possible, of course) to counter the economic downturn and minimize the damage from the global financial crisis – and if a country has an ineffective government, it is clearly not going to do a good job in this respect.

I am fully aware that there are only 10 million Belgians – it’s a small country and its problems are by far not as bad as what some other country today face. Yet from the long background analysis that I posted about a year ago, it seems that some of todays problems are the unforeseen unintended consequences of institutional reforms in the last decades – and that may make Belgium into a case study that can also be of interst to other countries, small and large, since we tend often to be too optimistic about the size, impact and relevance of unintended consequences of reforms and policies.

7

Nicholas 12.22.08 at 8:50 pm

I’m alarmed that so many of my Belgian friends regard this latest crisis as almost a natural outworking of the institutional impasse. It isn’t. And the current blockage in the discussion of institutional reform isn’t inevitable either. Both, however, have a common source: the ineptitude of Yves Leterme as Prime Minister.

Nobody forced Leterme to try and interfere with the judicial process over the Fortis/BNP Paribas deal; nobody forced him to keep changing his own story about what had happened; it was entirely his own choice.

Likewise, nobody drove Leterme to set impossible goals for a coalition deal last year, and nobody forced him to try and hardwire them into the negotiations by using the Flemish parliament. That made it almost impossible to put the government together, but that was the result of Leterme’s choice to prioritise political grandstanding ahead of the notion of governing the country.

Belgium does have a rather obscure and foggy political landscape, which is unusually difficult to navigate. But Leterme appeared incapable not only of reading the map, but even of getting it unfolded. He seemed to think that the fact that voters had given it to him should be enough. It wasn’t.

I see he has declared that he will not be seeking to return to government for the time being. Good.

8

P O'Neill 12.22.08 at 9:45 pm

It surprises me that there hasn’t more of this type of litigation in other countries. Even if shareholders in banks on average deserve to get the short end of the stick in these rescues, some of the government actions (e.g. in UK) have been quite abrupt in terms of their impact on incumbent shareholders (e.g. Northern Rock, Bradford and Bingley). Perhaps there’s the standard argument that whatever the government did was the best option on the table. Yet no one has been tempted to head to court to try their luck?

9

MH 12.22.08 at 10:20 pm

If somebody is in touch with the relevant opinion leaders in Belgium, please let them know that I am willing to be their king should they need to go to outsider as a compromise. I’m an ideal candidate as I am not beholden to any Belgium ethnic group, political party, organization, or corporation. I’m willing to relocate for the right job. I’m just as fluent in Flemish and I am in French. I have a long record of futile resistance to Germans even when I’m greatly outnumbered (show my picture about various German beer halls and hostels for proof). And, I am working on a plan to boost Belgian pride/international standing by reclaiming lost property along a certain river that rhymes with “Bongo.”

10

MH 12.23.08 at 2:41 pm

After having read the latest post (“The future is a shoe being thrown at a human face – forever!”), I’m reconsidering my offer.

11

Pravalika 12.25.08 at 4:54 pm

yeah this is most useful.

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