By Robert-Jan Bartunek
BRUSSELS (Reuters) - The chances of the formation of a Belgian government moved further off and the prospect of fresh elections grew, as a mediator tasked with building consensus between different linguistic groups stepped down.
Flemish Social Democrat Johan Vande Lanotte had been appointed to look for common ground between seven parties from Dutch-speaking Flanders and French-speaking Wallonia after direct talks to form a government failed in October.
But the two largest Flemish parties on Wednesday evening rejected his proposal.
"There is an old English saying: You can take a horse to the water but you can't force it to drink," Vande Lanotte told a news conference on Thursday. "One day the politicians will have to take that step in the interests of the prosperity of our country."
Belgium has been governed by an interim cabinet for more than 200 days, fuelling concerns in the financial markets over its ability to deal with its large public debt.
The Belgian/German 10-year bond yield spread widened to 113 basis points, up around 12 bps from levels seen at Wednesday's European settlement.
The spread reached a euro-lifetime high of around 150 bps in late November when a European Union/IMF bailout for Ireland failed to calm escalating euro zone sovereign debt concerns and investors ditched bonds from across the region.
Analysts now believe that elections are a distinct possibility in order to try to break the deadlock.
"If nothing else is possible, you have to vote in a democracy. It's the control+alt+delete of the political process," Professor Carl Devos at Ghent University told Reuters.
"It is not a structural solution to the problem but sometimes things improve afterwards."
(Reporting by Robert-Jan Bartunek in Brussels; additional reporting by William James in London; editing by Andrew Roche)
