by Andrew Stuttaford

Via the EU Observer, Belgium’s (acting prime minister) starts behaving like the shady CEO of a sinking Wall Street bank:

 Belgian acting Prime Minister Leterme has on national radio appealed to ordinary folk to buy more government bonds than usual in a regular ‘citizens’ auction.’ “Given the difficulties on the financial markets, we want to increasingly appeal to Belgian savings to finance the debt,” he said.

They would have to be crazy to do so. Seventeen months after its last election, le plat pays has no government for the very good reason that it has long ceased to be a country in any real sense of the word. It has a football (soccer) team, some of the best beer in Europe, the shared memory of  the wonderful Jacques Brel, a spectacularly crass king, a mountain of debt, and that’s about it. Belgian patriotism is now a contradiction in terms. An independent Flanders, on the other hand, would be quite a good financial proposition – and it would be a nation too, not a bloodless bureaucratic fiction. 


 I’m not sure whether Leherne was responding to this news or not. Either way, this is worth noting:

Belgium’s credit rating has been cut by Standard & Poor’s, on concerns that funding pressures could mean the country will have to take on more debt from its banks. Belgium, which saw its credit-worthiness cut by one notch to AA from AA+, is the latest eurozone country to be downgraded by the ratings agency.

“The ability of authorities to respond to potential economic pressures from inside and outside of Belgium… in our opinion is constrained by the repeated failure of attempts to form a new government,” S&P said in a statement.

Belgium has been run by a caretaker government for more than 500 days as its politicial parties bicker over forming a workable coalition.

“With exports of over 80pc of GDP, Belgium is one of the most open economies in the eurozone and is therefore in our opinion highly susceptible to any weakening of external demand,” S&P added.

Market turmoil also threatened the Belgian financial sector, said S&P, and raised “the likelihood that the sector will require more sovereign support.”

Belgium has been hampered by the bail-out of Dexia bank, which S&P estimated would increase the country’s debt by 1.1pc of GDP. French and Belgian governments were forced to inject €1bn each into Dexia in 2008 when the bank revealed that it had suffered £4bn of losses.Dexia was nationalised this October after further concerns where raised over its exposure to borrowers based in peripheral eurozone countries, namely Greece and Italy.

S&P’s move follows recent downgrades of Spain and Italy. Between September and October, all three of the main ratings agencies -Fitch, S&P and Moody’s – downgraded the countries’ credit ratings amid continued eurozone turmoil.

This might be a good moment to recall that up until the end of 2005 the European Central Bank had effectively treated all Eurozone sovereign bonds as if they had had identical risks of default.  If unrealistic expectations of convergence fuelled the lending binge, it should not be forgotten who, for so long, was leading the way. 

The Corner

The one and only.