Rating agencies lower creditworthiness of Belgium and Brussels: « Higher risk to invest in our country »
That Brussels was going to have it had been a public secret for months. The lamental budgetary situation and that the region has been without a full -fledged government for a year, make the decision of S&P to lower the rating from A+ to A is no surprise. The rating reduction of Belgium as a country, by Fitch, was less obvious.
Fitch points to the deteriorating public finances as a reason for reducing creditworthiness. « The tax position of Belgium has been structurally weakened in recent years, » it says, while the rating agency expects the debt ratio to rise even further. In addition, Belgium is faced with great expenditure as a result of the aging population and will also invest a lot more in Defense. The new rating of A+ is accompanied by ‘stable’ prospects.
Fitch reduces the creditworthiness of Belgium from AA to A+, after it had already left the rating twice, but had linked negative prospects to it. According to Prime Minister Bart De Wever, the Fitch’s decision was therefore a logical consequence of what had happened earlier.
Fitch decided to lower the rating of Belgium from AA to A+. – © In Pictures via Getty Images
« This was to be expected after the two negative advice that our country already received under the previous government. After that, a reduction is always followed. This again shows the urgency of the situation in which we find ourselves. It is now the time to continue and perform the reforms from the coalition agreement as quickly as possible. There is no alternative, » it sounds from Wetstraat 16.
Minister of Budget Vincent van Peteghem (CD&V) also talks about a signal that the package of reforms must be urgently executed. He also fears that the lower rating will increase interest rates, just now that the interest charges on our towering debts are already increasing considerably. « This gives the signal to the financial markets that there is a higher risk to invest in our country. The effect is that investors can withdraw and the interest charges can still increase in the long term, » says the CD&V minister in an interview with this newspaper.
Economist Gert Peersman (UGent) does not think that the rating reduction of Fitch will already have too large effects of the interest.
Not everyone thinks that Fitch’s decision will have major consequences. According to economist Gert Peersman (UGent), the financial markets always anticipate some rating agencies. And Jean Deboutte, top executive of the debt agency, points out that a lower rating does not always lead to higher interest rates. « Look at Portugal, which has a lower rating than Belgium, but has to pay less interest ».
Even if the interest rates go up, it has no budgetary consequences in the short term. This may be the case in the longer term. The fact is that Belgium has scored slowly but steadily worse since 2006 and that it must slowly unload the connection with the top within the EU.
« This was to be expected after the two negative advice that our country already received under the previous government. After that, a reduction always follows. »
Bart De Wever
Prime minister
In any case, it is also politically annoying for Arizona. Prime Minister Bart De Wever stated when he took office that he wanted to stop the rotten of the budgetary situation. But according to various institutions – the European Commission, the National Bank and the Planning Office – that will not work. Fitch’s decision can then be read as a lack of trust in the reforms of Arizona, that they will not turn the tide.
