How Belgium Mirrors Europe's Economic Divide

LYNN NEARY, HOST:

This is MORNING EDITION from NPR News. I'm Lynn Neary.

RENEE MONTAGNE, HOST: And I'm Renee Montagne.

Let's spend the next few minutes contemplating the economy at the street level. In a moment, a small business here in California that's managed to thrive by producing an innovative new technology. First though, Philip Reeves takes us to the heart of old Europe, to a single country that mirrors the economic troubles all around it.

PHILIP REEVES, BYLINE: The people of Antwerp always know what time it is. Their soaring Gothic cathedral announces every hour with a flourish.

(SOUNDBITE OF BELLS RINGING)

REEVES: The cathedral is testimony to this city's history as a major cultural and trading center. Antwerp's the second largest port in Europe and the world's largest diamond trading city.

(SOUNDBITE OF BELLS RINGING)

REEVES: As the morning begins, people stride purposefully across the cobbles, heading off to work. We're in Belgium. The European Union and NATO have their headquarters in this country's capital, Brussels. For centuries, Europe's powers fought their battles on this turf. These days, though, the place is a picture of prosperity and orderliness. At least, that's how it seems.

There's something else you need to know. Belgium has no government. Perhaps that's putting it a little strongly. Belgium's regional and local governments are functioning just fine. But the federal government was elected 16 months ago and has been locked in coalition negotiations ever since. Talks are finally reaching a conclusion, long after breaking the world record for coalition-haggling previously held by Iraq.

Belgians don't seem particularly proud of this. Eighty-nine year old Roger Sleecks is waiting to catch a tram.

ROGER SLEECKS: It's always financial. There is - people have no problem. Only the politicals, they have a problem. How many much money you can spend and I can spend. That's all.

REEVES: The reasons forming a government's taken so long are complex. Underlying them, though, is a basic theme. Belgium roughly falls into two halves, straddled by Brussels. Antwerp is in the north in the Flanders region. The people here, the Flemings, speak Dutch. In southern Belgium lies Wallonia. The Walloons speak French.

Pieter Leuridan, economics correspondent for the Gazat Van Antwerpen newspaper, says Wallonia used to be doing pretty well.

PIETER LEURIDAN: They have a great, great industrial history that collapsed in the seventies and now they need the money from the Flemish part.

REEVES: The north is subsidizing them?

LEURIDAN: Yes, the north is in effect subsidizing them by the federal level. And the fact is that the north wanted some guarantees.

REEVES: Let's get this straight, the wealthy industrious Germanic north is piping money down to the poorer, less productive Latin south, and it resents that. Sound familiar?

Geerth Noels from the asset management company Econopolis says Belgium is a microcosm of the tensions now surfacing in the eurozone between the north, dominated by Germany, and struggling southern countries.

GEERTH NOELS: Belgium in a certain way is exactly Europe in small, with all the problems between Greece and Germany on a smaller scale, combined in this beautiful small country.

REEVES: This small country is now feeling the effects of the eurozone's larger problems. Europe's sovereign debt crisis is spreading to its banking system. A big Belgian and French bank, Dexia, is in trouble. Talks are underway right now to rescue it. Peter Leuridan believes things could get rough for Belgians if Greece actually defaults as this would drive up government borrowing costs.

LEURIDAN: That could be critical for Belgium, I think, a Greek default. That could be critical. I think, first Spain, Portugal, Italy will be on a critical level, and then we are in the danger zone, I think.

UNIDENTIFIED GROUP: (Singing in foreign language)

REEVES: As morning turns to afternoon, there's no sense of danger on Antwerp's streets. Students are celebrating the start of the new school year by downing large quantities of one of the Belgium's biggest products - beer. As for having no federal government in Belgium, well, who really cares? Certainly not computer science student, Thomas Flamant.

THOMAS FLAMANT: Some governments look at Belgium and the first thing they think about is that we don't have a government and all that. But I don't really believe all that. I mean, I just don't give a (beep) about it. It doesn't affect me one bit.

REEVES: Philip Reeves, NPR News. Transcript provided by NPR, Copyright NPR.