Belgium's new government has confirmed it is repealing a controversial law which gives the courts power to try all cases of war crimes no matter where they were committed or by whom.
Verhofstadt has just won a second term as prime minister
Guy Verhofstadt - who took office as prime minister for a second term on Saturday - said the new coalition had decided as one of its first acts to scrap the law, which has angered the United States.
Under a new bill, only war crimes cases involving Belgians, or foreigners living in Belgium, would be considered, he said.
Several world leaders - President Bush, UK Prime Minister Tony Blair and Israeli Prime Minister Ariel Sharon - had cases filed against them under the "universal competence" law.
The action prompted the Americans to warn that they would block further funding for Nato's new headquarters in Belgium until the legal threat was withdrawn.
It is expected that the bill will be approved by parliament in the coming weeks in a move which was initiated last month, and will bring the law in line with that from other Western states.
Mr Verhofstadt heads a coalition of Liberals and Socialists and was appointed head of government on Saturday by King Albert, who approved the cabinet list.
The coalition deal was struck earlier this week, nearly two months after a general election, in a final marathon round of all-night talks.
The resulting pact includes more spending on healthcare - at the Socialists' insistence - and continuing tax cuts, as demanded by the Liberals.
Mr Verhofstadt acknowledged that Belgium's budget would not balance for the fourth year in a row, blaming the European economic slowdown.
But he declared himself "very happy" with the deal.
"[The agreement] aims to develop a positive project for our country in these difficult times," Mr Verhofstadt told reporters after the 14 hours of talks.
The Liberals and Socialists were previously in a three-way coalition with Greens, who are absent from the new line-up after suffering a disastrous election performance.
The Greens lost all nine of their seats in Flanders, and seven out of 11 in Wallonia.
Mr Verhofstadt's Flemish Liberals and their French-speaking counterparts hold a total of 49 seats in the 150-member parliament. The two socialist groups have 48 members.
The far-right Vlaams Blok, which wants Flemish independence, boosted its number of seats from 15 to 18, after its share of the vote rose around four percentage points to an estimated 19% in Flanders.