* Belgium holds federal, regional, EU elections on May 25
* Belgium set record 541 days in 2010-2011 to form
* Flemish separatist N-VA party forecast to be big winner
* Softer N-VA line on state reform could ease deadlock
By Robert-Jan Bartunek and Philip Blenkinsop
BRUSSELS, April 29 Temuraz Sadoyan has no strong
view on whether Belgium should split, but he is clear about what
he wants from a future federal government after a May 25
"Tax is the number one issue for me. I'm self-employed, but
most of my time I'm effectively working for the state," said
Sadoyan, who came to Belgium 21 years ago from Georgia and now
lives in Asse, a town in the Dutch-speaking region of Flanders.
He is just the sort of voter the N-VA (New Flemish
Alliance), already the largest party in Belgium's parliament, is
seeking to attract with a campaign focusing on its tax-cutting
credentials rather than its longer-term separatist aims.
It is a shift of emphasis offering Belgium hope that it will
avoid a repeat of the 2010-2011 political crisis.
Then N-VA's demand to devolve more powers to Belgium's
regions led to a world record 18 months of deadlock, eventually
prompting alarmed investors to think of the country as "Greece
of the North. Six other parties finally formed a government.
N-VA is again seen as the winner of this year's election,
with up to a third of the vote in Flanders, from 28 percent in
2010, giving it the lead in subsequent coalition talks.
The party itself recognises that, for the moment at least,
there is no majority in Flanders for independence.
Its manifesto includes a proposal to turn Belgium into a
confederation of largely autonomous regions, an idea that could
lead to a prolonged stand-off with French-speaking parties
vehemently opposed to the break-up of the country.
However, in recent weeks the N-VA has stressed its
tax-cutting and law and order credentials, relegating its
confederation demand to the background.
"We will go to the negotiating table with a list of demands
but the emphasis will be on socioeconomic reforms," N-VA's
parliamentary leader Jan Jambon told Reuters. "We want to be
part of the next government."
Its proposals to cut income tax and set a time limit for
unemployment benefit appeal to centre-right Flemish voters who
complain they are paying for benefits in French-speaking
Wallonia, where the jobless rate is twice that of Flanders.
LEFT VS RIGHT DEBATE
Analysts say the party has recognised there is less appetite
for change. Belgium has now pushed through reforms giving
regions and communities more say on economic and employment
policy, even if it does not go far enough for the N-VA.
"The consensus before in Flanders at least was for a reform
of the state. Now it is only a call from the N-VA and even they
have adjusted what they are asking for," said Dave Sinardet,
politics professor at the Vrije Universiteit Brussels.
The focus of the election campaign has been on possible
measures to accelerate economic recovery, boost competitiveness
and reduce income tax, more of a left versus right debate than
pro-Belgians versus Flemish nationalists.
The tax burden on employers and employees for labour income
in Belgium is the highest in the 34-member Organisation of
Economic Cooperation and Development (OECD), at 56 percent for a
single person on the average wage.
The prospect of a centre-right government including the N-VA
appears possible given that the socialists of Prime Minister
Elio Di Rupo are expected to emerge weakened from the polls.
Even at the best of times though, Belgian governments can
take months to form. A government by Christmas might be
considered a success.
The big question, according to Pascal Delwit, politics
professor at the Universite Libre de Bruxelles, is whether the
N-VA is willing to govern without further state reform.
"Sometimes they say yes, sometimes no," he said.
HIGH DEBT, FALLING COMPETITIVENESS
Could Belgium cope with another crisis?
While Belgium appeared to do manage most of the 18 months in
2010-2011 with only a caretaker government, the explosion of the
euro crisis in 2011 alerted volatile financial markets to the
country's public sector debt of around 100 percent of GDP.
Belgium's 10-year bond yield rose to almost 6 percent and
ratings agencies began cutting the kingdom's credit status.
Voters sense the economic situation is less acute, but do
not want a repeat of the 2010-2011 trauma.
"I hope the politicians have the brains to work together,"
said French-speaking Mehdi Toukabri from Brussels.
Economists say Belgium needs to address high wage costs and
lower productivity, which have undermined the competitiveness of
exports from chemicals and pharmaceuticals to beer, chocolate
and other processed foods. Exports make up some 65 percent of
GDP. Economic growth last year was just 0.2 percent.
"If the economic recovery continues then in the short term
it's manageable, but if there are negative shocks then you get a
focus on the big debt, which would be a problem. Longer term
you're losing time for structural reform," said ING's Ledent.
($1 = 0.7204 Euros)
(Writing by Philip Blenkinsop; Editing by Angus MacSwan)