€60bn bailout bill heaps pressure on Belgian state

THE BAILOUT of Dexia has further weakened Belgium’s chances of avoiding a downgrade of its government debt, ratings agencies warned.

The central European nation has spent nearly €60bn on shoring up Dexia and buying its Belgian retail arm, just three days after Moody’s warned of a possible downgrade.

After the Dexia bailout was finalised yesterday Belgian Prime Minister Yves Leterme hailed the deal for the “fair division of the costs”.

That sentiment has not reassured ratings agencies, however. Douglas Renwick from Fitch said: “The cost to the Belgian government of supporting Dexia is not insignificant and highlights one of Belgium’s rating weaknesses, namely its large banking sector and the contingent liability this poses to the state.”

Fitch and Standard & Poor’s both currently have AA+ ratings on Belgium and on Friday Moody’s said it had placed the nation’s Aa1 government bond ratings on review.

Belgium’s debt-to-GDP ratio was 96.2 per cent last, which was worse than all Eurozone members apart from Greece, Italy and Ireland.

Moody’s has also placed numerous Belgian firms, including SNCB and Infrabel, as well as some of the country’s regions, on review for possible ratings downgrades.