Belgian prime minister Yves Leterme's five-month-old government collapsed today after the Flemish liberal party pulled out of his coalition.
Mr Leterme (49) called an emergency meeting of his cabinet early this afternoon to inform ministers that his second term in office was at an end, and left for the royal palace to tender his government's resignation to King Albert.
"Yves Leterme had no other choice than to inform us that he would go to the king immediately to tender the government's resignation," Health Minister Laurette Onkelinx told reporters.
Without the backing of the centre-right Open VLD, the remaining four parties in government still have 76 of the 150 seats in the lower house of parliament but it would be hard to govern with such a slim majority.
Open VLD said it had lost confidence in the government because of its failure to resolve a dispute between French- and Dutch-speaking parties over electoral boundaries around the capital, Brussels.
"We have not agreed on a negotiated solution and therefore Open VLD no longer has confidence in the government," said Alexander De Croo, the party's chairman.
Economists have expressed concern that political paralysis would harm the prospects of reducing Belgium's budget deficit, which the government has forecast will be 4.8 per cent of gross domestic product in 2010.
Belgian debt is expected to exceed 100 per cent of GDP this year.
The premium investors demanded for holding Belgian debt increased today. The spread between 10-year Belgian bonds and German bunds had widened to 49 basis points from 43 at yesterday's close, although this was in line with a widening trend for other euro zone sovereign bonds.
Leterme became prime minister for a second time last November when Herman Van Rompuy left the post to become president of the European Union.
Even at the start of his second term political and economic analysts had warned that it could prove as unstable as his first nine months in power in 2008, when Belgium lurched from one crisis to another.
Mr Leterme's nine-month struggle to form his first government fuelled concerns in the media at the time that Belgium could break apart and raised the risk premium investors demanded to hold government bonds.
Belgium, home to European Union institutions and the Nato military alliance, can ill afford to let domestic problems drag on as in July it takes over the six-month EU presidency, an organisational role held by each member state in turn.
Reuters