Belgium downgraded by Standard & Poor’s

Standard & Poor’s has lowered Belgium’s credit rating by one notch, in a further sign the eurozone’s debt crisis is not confined to its peripehery.

Belgium joined Portugal and Hungary late last week on a growing list of major downgrades within, or tangential to, the eurozone.

In Belgium’s case, S&P cited a threat to the country’s economy caused by difficulties exporting as reason.

Further reasons were growing pressure from capital markets, weakening economic growth and political instability, in a country that has not had an elected government for about one and a half years.

The country fell from AA+ to AA with a negative outlook. AA is the third best rating in S&P’s system.

It is the seventieth developed world downgrade since the 2008 financial crisis.

Funding pressure on the Belgian state from its financial institutes could push the already high level of debt – 97% of GDP in 2011 – beyond 100%, the agency said.

The stability pact for the eurozone allows 60%, but Belgium entered the bloc with levels of over 100% back in 1999.

Belgium is also weighed down by the nationalisation of Dexia earlier this year.

S&P also noted Belgium’s political difficulties.

The inerim government can only take short-term measures, but no far-reaching savings- and structural reform, it said.

Belgium’s political crisis reached a new high point last week as the designated leader Elio Di Rupo hit trouble with setbacks in budget negotiations.

Yields on 10-year Belgian debt hit 5.765% on Friday.


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