Investors give Belgium the benefit of the doubt

Investors give Belgium the benefit of the doubt
Credit: Belga

The Debt Agency has  issued a warning to MPs about Belgium’s budget deficit: the situation is under control but the European Commission and credit rating agencies will become more pressing, directors Jean Deboutte and Maric Post told the chamber’s finance committee.

“Investors are giving us the benefit of the doubt for now,” Deboutte noted. “But there is a limit to what we can use to convince investors that everything is going well.”

Fitch downgraded Belgium’s rating recently while Standard & Poors confirmed it. According to the Debt Agency, this relative stability is due, among other things, to investors’ confidence that “Belgium has always taken timely measures in the past”.

Like the governor of the National Bank last week, the Debt Agency warns that the situation could deteriorate if a crisis were to occur.

The Debt Agency painted a mixed picture of the Belgian situation. Thanks to prudent debt management at a time of low interest rates, the impact of the debt has been limited. But forecasts for the coming years darken the picture and Belgium’s public deficit risks falling behind European averages.

“The shock of the rate hike was quite abrupt but it is not something that should happen every day. What is different is the budget deficits. With the debt management strategy, we have limited the refinancing of high interest rate debt but what is new is the budget deficit that has to be financed at a new rate,” Deboutte stressed.

This warning comes on the heels of one from the Federal Planning Bureau and the governor of the National Bank; it also comes as the federal government discusses the 2023 budget controls. “We are in the moment where we have to send a signal,” said MR group leader Benoît Piedboeuf.

The discussions, however, seem to be stalling after two weekends of conclave that failed to reach an agreement. The federal government met again on Monday in a restricted committee and a new meeting was scheduled for Tuesday at 5pm.

For several days now, the Prime Minister has wanted to make an additional effort of around €1.7 billion over two years to beat the forecasts, but the request or the way to achieve this does not go down well with the left. On the Socialist side, exasperation with the Liberals was perceptible.

“For five days now, the Prime Minister has been coming back again and again with proposals that are each harsher than the last towards the weakest,” the Socialists pointed out.

They accused the Liberals of wanting to abolish the last tranche of the minimum pension increase on 1 January.

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