Market turmoil threatened the Belgian financial sector, said S&P, and raised "the likelihood that the sector will require more sovereign support. 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 political parties bicker over forming a workable coalition. "With exports of over 80 % of GDP, Belgium is one of the most open economies in the euro zone and is therefore in our opinion highly susceptible to any weakening of external demand," - S&P added. Belgium, which saw its credit-worthiness cut by one notch to AA from AA+, is the latest euro zone country to be downgraded by the ratings agency. The 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 euro zone turmoil. The dramatic week came against a backdrop of record borrowing costs. The extra yield demanded by investors to hold 10-year Belgian bonds instead of safe-haven German bonds widened to a euro-era high of 3.72 percentage points Thursday, before easing slightly to 3.61 percentage points, according to Tradeweb data. 
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Saturday, November 26, 2011
Standard & Poor's downgrades Belgium
Market turmoil threatened the Belgian financial sector, said S&P, and raised "the likelihood that the sector will require more sovereign support. 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 political parties bicker over forming a workable coalition. "With exports of over 80 % of GDP, Belgium is one of the most open economies in the euro zone and is therefore in our opinion highly susceptible to any weakening of external demand," - S&P added. Belgium, which saw its credit-worthiness cut by one notch to AA from AA+, is the latest euro zone country to be downgraded by the ratings agency. The 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 euro zone turmoil. The dramatic week came against a backdrop of record borrowing costs. The extra yield demanded by investors to hold 10-year Belgian bonds instead of safe-haven German bonds widened to a euro-era high of 3.72 percentage points Thursday, before easing slightly to 3.61 percentage points, according to Tradeweb data. 
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3 comments:
The whole thing is a complete nightmare and, as the financial sector struggles, the effect will be felt through the real economy dragging counties into recession and possible depression. And all of this due to some stupid bone-headed bastards, who thought it would be a great idea to impose a common currency on continental Europe!
It is a nightmare, but Eurosceptics make too much political capital of this.
a) The inflation of credit we saw the last 30 years was global not European
b) The credit boom has been caused by mismanagement in the financial system but more importantly it reflects the inability of the Capitalist economy system to return enough incomes to labour & governments that could sustain a healthy level of economic activity and employment. Simply, without this debt stimulus hundreds of millions of jobs would not exist today. The problem is a problem of low global demand, and it is a structural problem of the Capitalist economy. With the levels of private and sovereign debt, it would have arisen with or without the Euro.
c) The crisis did not start in Europe, it started in the USA. The crisis of 2008 doubled and in cases trebled debt and/or deficits in most countries
d) Overall Europe has a relative low debt/GDP ratio and deficit. The crisis in Europe could have at least temporarily resolved last year if the ECB monetised the debt of small peripheral countries or if they issued Eurobonds. But the wrong policies were followed. Austerity was not the answer.
Europe is getting further into the mire. History will show just how bad the decisions by all in power have actually been. There now seems little chance of anything orderly and controlled happening. So it looks like financial chaos to me; when? I don't know, but likely to be soon. Meeting after meeting and nothing worthwhile happening; how long can it continue? For things to be as they are must indicate that the markets still think there is value left in Europe. Are they still hoping for a miracle? Why? The markets must realise now that Europe has a death wish. Surely they will soon, very soon, race for the exits.
Will it be a happy Christmas?
Schauble – Germany's finance minister – was still banging on today about how the way out of this crisis is for deficit countries to demonstrate fiscal discipline to overcome their indebtedness. In other words, the whole of Europe should become little Germanies. In other words, it's not just the Greeks who are feckless good-time Charlies, but the Italians, the Spanish, the Portuguese, the Irish, the Belgians, and soon the French, Hungarians, Maltese, Cypriots, and even the British – with all their private debt. Someone's got to take the Germans by the scruff of the neck, tell them to stop seeing the eurozone crisis in racial terms but as a crisis of their own making, of their attempts to design the eurozone in such a way as to guarantee German exports and surpluses at the expense of the rest of the European economy.
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