By Philip Blenkinsop
BRUSSELS (Reuters) - Belgian King Albert accepted the resignation of Prime Minister Yves Leterme's five-month-old government on Monday, plunging the country into a crisis that could harm its economic recovery and its standing in Europe.
The monarch asked Leterme, 49, to stay on in a caretaker capacity, the palace said in a short statement four days after the coalition collapsed over a standoff between Dutch- and French-speaking parties.
The king had tried to defuse the situation over the weekend, consulting with party leaders and asking Finance Minister Didier Reynders, a French speaker, to try to mediate and break the impasse. Reynders asked to be discharged on Monday.
Unless the king comes up with a new initiative, Belgium appears headed for an early election before the next scheduled one in 2011.
That could throw into chaos Belgium's preparations for its six-month presidency of the European Union, due to start in July.
Leterme, who has now stepped down twice in three years, said in a written statement that he regretted a negotiated solution had not been found.
"While waiting for initiatives from the head of state, the government will continue to ensure effective monitoring of current affairs in the interest of the country and citizens," the statement said.
Economists are concerned that political paralysis in the country of 10.6 million people could harm efforts to bring its national debt back below 100 percent of gross domestic product.
GDP fell 3.0 percent last year and is likely to grow a modest 1.0 percent in 2010. The budget deficit for this year is put at 4.8 percent of GDP.
Some Belgian media have already begun questioning the value of keeping their 180-year-old country together.
Leterme tendered his resignation on Thursday after the Flemish liberal party, Open VLD, withdrew from his government.
Open VLD said it had lost faith in the coalition because of its failure to resolve a dispute between French- and Dutch-speaking parties over electoral boundaries around the capital, Brussels -- a complex and extremely divisive issue.
To complicate matters further, the Constitutional Court has said a solution must be found before elections can be held, leaving politicians on Monday to debate whether an election could go ahead as well as blaming rivals for the crisis.
(Reporting by Philip Blenkinsop; editing by Charlie Dunmore)
