FLEMISH POLITICAL PARTIES: CD&V GOVERNMENT SAVED

C O N F I D E N T I A L SECTION 01 OF 02 BRUSSELS 001558 SIPDIS STATE PASS EUR/WE KATE SHARP E.O. 12958: DECL: 10/03/2019 TAGS: PREL PGOV MOPS AF BE SUBJECT: FLEMISH POLITICAL PARTIES: CD&V GOVERNMENT SAVED BY FINANCIAL CRISIS? Classified By: Political Economic Counselor Richard Eason for E.O. 1295 8 Reasons (B) and (D) ¶1. (C) Summary: Flemish Christian Democrat (CD&V) International Affairs Secretary Peter Gijsels provided POLOFF a broad read out of his party's domestic challenges steering the national coalition government and its view of the trans-Atlantic relationship. Just two weeks ago, the government of CD&V Prime Minister Yves Leterme was on the verge of collapsing due to its inability to achieve a consensus on Belgian institutional reforms, which caused rifts within CD&V ranks and forced a split with electoral partner N-VA. By showing clear leadership in negotiating (now failed) bailout packages for Belgian based banks Fortis and Dexia, the Leterme government received a new lease on life. Gijsels thinks the Leterme government can continue its full term through 2011 as long as it can show leadership in the economic realm and move forward on the institutional reforms demanded by the Flemish parties. If the handling of the developing economic crisis worsens or the francophone parties continue to stymie state reform, federal elections could be held as early as June 2009, along with regional and European elections. Gijsels, who will manage the CD&V's European Parliament campaign, said it is impossible to predict at this time whether early elections will be called. The CD&V, and most Flemish parties, strongly support the trans-Atlantic relationship and NATO. Regardless of who wins in November, the GOB will push for better Washington-Brussels relations, both bilaterally and through the European Union. End Summary. Domestic Political Squabbling and the Leterme Government -------------- -------------- ¶2. (C) Just two weeks ago, according to Gijsels, most political observers predicted the Leterme government's resignation because of its failure to move forward on institutional reform. This national-regional reform, which would devolve more responsibility to regional governments, had become the single most important political issue for the Flemish parties and their electorate. The French parties had refused to discuss the issue, which would reduce the flow of social security subsidies from the wealthier Flemish north to the economically stagnant Walloon south. As frustration between French and Flemish parties grew, CD&V's Flemish-nationalist electoral partner, N-VA became more strident. During its mid-October party Congress, the N-VA voted to separate from the CD&V, causing Leterme's government to lose six seats and losing its majority of the Flemish representation in Parliament. The Banking Crisis Saved Leterme's Leadership -------------- ¶3. (C) The CD&V held its party congress on September 27, where Leterme was able to hold off calls for early elections, even though radical members of the youth wing of the party were calling for the government's resignation. Gijsels referred cynically to the global financial crisis as a "miracle" for the Leterme government. Leterme successfully argued that Belgium needed a strong government to deal with the crisis that had left two of Belgium's largest banks exposed to toxic assets, and the majority of the party rallied behind his government that was already working on a plan to bailout Belgium's largest bank Fortis. Gijsel's said that party insiders believe the Leterme government could survive the remainder of its term through 2011 if Leterme can continue to show strong leadership and make some headway on institutional reform. The latter might now be easier without the strident N-VA as part of the equation; the Flemish politicians hope the French parties will be more likely to negotiate without N-VA. If Leterme's government fails to make any headway, national elections could be held as early as June 2009, concurrently with the regional government and European Parliament elections. CD&V Values the trans-Atlantic Partnership -------------- ¶4. (C) When asked about his party's view on foreign policy, Gijsels said the CD&V had a strong trans-Atlantic orientation. He noted that the new DefMin Pieter De Crem is doing his best work with Allies, whereas the previous Socialist and pacifist DefMin Flahaut's decidedly less pro-American behavior embarrassed many Belgians. When asked about the other Flemish parties, he said that most of them supported a strong trans-Atlantic relationship as well. Gijsels also indicated that the Belgian government would push hard to improve trans-Atlantic relations regardless of who BRUSSELS 00001558 002 OF 002 wins the U.S. election in November. He even proposed a regularly scheduled dialogue on common issues. When asked whether such a dialogue would duplicate the efforts of U.S. - E.U. summits, he suggested that a regular informal discussion between European Allies would be useful in a different context. When asked about Belgium's contribution to ISAF in Afghanistan, Gijsels said Belgium was in Afghanistan not only because of its Alliance responsibilities, but because the GOB believed in the mission. He cautioned however that setting aside resources in the current budget situation was difficult, and though the GOB is supportive, the Belgian public is not prepared to accept body bags. Conclusion -------------- ¶5. (C) From the CD&V perspective, as of October 3, it is clear that the financial crisis was viewed as opportunity to show leadership, which had become the Leterme government's key justification for continuing to govern. Unfortunately, for the CD&V, the bailout deals that Leterme had negotiated to save Fortis and Dexia collapsed over the weekend of October 4-5. The Netherlands nationalized Fortis' Netherlands based assets and the remainder went to French bank BNP Paribas. Chances are Dexia will be split into French and Belgian halves as well. If public opinion determines that Leterme's government was in fact powerless and weak during a time of crisis, his government may have to announce early elections sooner rather than later. .