Flemish separatists set for Belgian election gains

According to early results, the opposition N-VA (New Flemish Alliance), was on course to win almost a third of the votes from the Dutch-speaking region of Flanders, the economic powerhouse in the north of the country where some 60 percent of Belgians live.

The party, which captured 28.2 percent of the Dutch-speaking vote in 2010, has proposed transforming Belgium into a loose confederation of linguistically distinct regions, giving more power to regional governments as part of a separatist and centre-right agenda.

It was shaping up to be a sobering night for the socialists of Prime Minister Elio Di Rupo, who lost voters to a newly created hard left party although they should remain the largest force in the French-speak south of Belgium.

The electoral system - effectively two elections with separate French-speaking and Dutch-speaking parties appealing to different voters - means at least four parties, and two from each side, will be needed to form a governing coalition.

Belgium's national election comes at the same time that millions across Europe vote for a new European Parliament, with right-wing, anti-EU parties expected to attract a surge of protest votes in many countries.

However, a day after a gunman shot three people dead at Brussels' Jewish Museum, the far right, anti-immigrant Vlaams Belang (Flemish Interest) appeared to have polled poorly.

After the last election in 2010, battles over further devolution and the budget led to 18 months of stalemate before six parties finally agreed to a coalition - an unwanted world record for government formation.

Then, as the would-be partners wrestled over a budget, markets seeking further victims in the euro zone crisis looked to debt-laden Belgium and dumped its bonds, sending the yield on 10-year government paper to almost 6 percent.

Nearly eight million Belgians voted on Sunday in a far calmer period for the euro zone as a whole and just six days after the AA-rated sovereign sold 10-year debt at a record low of 1.92 percent.

Economists say a political stalemate may be less damaging this time, although Belgium's public sector debt is still around 100 percent of GDP (gross domestic product), the sixth highest level in the 28-member European Union.

(Reporting By Philip Blenkinsop and Robert-Jan Bartunek. Editing by Mike Peacock)