Baudouin strives to avert chaos: Regional splits and budget row bring Belgium to breaking point

KING BAUDOUIN spent yesterday trying to avert the chaos that has been building for four months and threatens to destroy Belgium's economic security and international reputation as a model European state.

The King has been characterised, along with the national debt, as the only thing holding Belgium together. He is all that stands between conflict and consensus in a nation strained to breaking-point by regional differences exacerbated by a weakening economy.

On Tuesday night, after three days' argument over budget cuts, the Prime Minister, Jean- Luc Dehaene, called his government's bluff and tendered his resignation to the King, who is considering whether or not to accept it.

The row is over 35bn Belgian francs ( pounds 700m). The government's four coalition partners are committed to reducing the budget deficit - 6.9 per cent of gross national product (GNP) - to 3 per cent of GNP by 1996. That is a requirement for European monetary union, which Belgium fervently supports. All are pledged to shave Bf110bn from this year's budget and are agreed on cuts of Bf75bn.

Mr Dehaene's Flemish Christian Democrats suggested the remainder be found by limiting index-linked salary increases and using the money to help fund the social security system. To the French-speaking Socialists, the index-linking of salaries is an unbreakable tenet of faith.

The budget battle is the latest manifestation of a deeper political fight between the French- speaking Walloons and the Flemings, who live in the northern half of the country. Wallonia, home of Belgium's heavy industry, has been declining for some two decades, its prime businesses sold to France, and it smarts at seeing Flanders, viewed as a region of shopkeepers, now dominating the economy and the government.

The Socialists, who are the dominant party in Wallonia, believe that the only way of saving money and preserving Belgium's comprehensive welfare system is to raise taxes. The Christian Democrats, the dominant Flemish party, complain that this would perpetuate the system whereby rich Flanders is taxed to pay for bankrupt Wallonia.

Since becoming Prime Minister in March last year, Mr Dehaene has struggled to reconcile the two sides by introducing institutional reforms making Belgium a federal state and granting more autonomy to the country's Flemish, French and tiny German speaking-communities. Belgium, which likes to think of itself as the model European, suggests that its peaceful transition to federalism offers a blueprint for other nations struggling to contain nationalist sentiments.

Outsiders may write scare headlines about a Czechoslovak- type schism or the Balkanisation of Belgium, but Xavier Mabille, a leading political commentator, dismisses such analyses as media hype or chauvinism: 'No one has ever died in the cause of Belgian federalism,' he says.

The transition may be bloodless but it is certainly painful. The complexities of engineering a peaceful division of power have alienated the electorate, which registered its dissatisfaction in November 1991 by voting, especially in Flanders, for the extreme right, which campaigned on a separatist platform. To win back voters, the mainstream parties have been forced to talk in more nationalist terms: the leader of the Flemish community has gone on the record suggesting that the institutional reforms under way are a first step towards the creation of a Flemish state.

The King will have all this in mind as he considers his decision. He could accept the government's resignation but insist it first sees through the institutional reforms, due for completion by July.

He could refuse, forcing the government to negotiate its way out of the impasse. Or he could appoint an independent arbiter to try to fashion a new coalition. Another course would be to dissolve parliament, forcing fresh elections.

This last option would surely produce fresh gains for the extreme right and as inconclusive a result as the last election, after which it took more than 100 days to form a government.

Worse still, an election could not be organised much before July. Belgium, the model European state, would thus face the ignominy of taking over the EC presidency in the second half of next year without a government.

The starkness of the choice may persuade the ruling coalition parties to rethink their positions, humbled perhaps by a recent opinion poll indicating that one in two Belgians believes the government is not devoting enough attention to reducing the budget deficit and that nine out of 10 think the real issues of the day have little to do with regionalism, federalism or separatism, but concern the creation of jobs, rising crime and political corruption.