Belgium's government collapsed yesterday after its supreme court found signs that it had sought to sway a legal ruling on the future of stricken bank Fortis.
" Leterme put the proposal to the cabinet and they have agreed to it," Mr Leterme's spokesman Peter Poulussen said by telephone.
Under the constitution, King Albert must decide whether to accept the resignation. In July, Mr Leterme had tendered his resignation after failing to break a political deadlock among the countrys linguistic groups, but the king refused it.
The Leterme spokesman declined to say when the prime minister would go to the king this time.
Observers said the likely next steps would be a reshuffled cabinet without Mr Leterme or early elections, an option few of the ruling parties would want amid a deepening economic crisis and with the Fortis debacle on voters' minds.
"We'll have to look at how we assure stability in our country - political stability we don't have at the moment. I hope that we'll at least find a way of managing things in 2009," finance minister Didier Reynders told Belgian television.
Mr Leterme had been under pressure to quit over accusations his office had sought to influence an appeal court ruling that last week froze the break-up of Fortis.
Earlier, an eagerly awaited report by Belgium's supreme court did not specifically target Mr Leterme but concluded: "All the above of course does not offer . . . legal proof of an attempt to interfere with the judiciary, but there are undoubtedly significant indications which point in that direction."
Mr Leterme has denied influencing the appeal court, although he acknowledged one of his officials had contacted the husband of one of the judges several times.
Fortis was carved up by the Dutch, Belgian and Luxembourg governments with France's BNP Paribas buying the Belgian operations after an €11.2 billion cash injection failed to calm investor concerns over its health.
Shareholders launched legal action, and the court victory has thrown the government's bailout plans into disarray.
They have seen their shares drop from almost €30 in April 2007, when Fortis launched its ill-fated bid for Dutch rival ABN Amro, to just over €1 now.
BNP too has suffered, its shares dropping some 30 per cent this week on increasing speculation that a collapse of the Fortis deal could weaken the bank's capital position and force it to turn to shareholders for cash.
The addition of Fortis's retail customers would make BNP the biggest bank in terms of deposits in the 15-country euro zone.
However, Fortis shareholders cheered mention of the court ruling at a meeting yesterday, at which they voted to continue the company's business rather than liquidate the assets.
Mr Leterme came to power in March after nine months of deadlock over the extent that powers should be devolved to Belgium's regions - a key demand for Dutch-speaking Flemish parties.
The row reignited speculation the 178-year-old country could break up. - ( Reuters)