Belgium Gets Cut by Moody’s in Reproof at Failure to Cut Debt

Belgium was lowered one step by Moody’s, underscoring how the struggle to cut one of the biggest budget deficits in Europe is besmirching the country’s status as a borrower.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Belgium was lowered one step by Moody’s, underscoring how the struggle to cut one of the biggest budget deficits in Europe is besmirching the country’s status as a borrower.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The rating is now assessed at A1, six notches above junk, with a stable outlook, the company said on Friday. That’s an equivalent score to that of Fitch Ratings, which already lowered Belgium last year.“This government will be unable to implement measures sufficient to stabilize the debt burden,” Moody’s said in its statement. “Although the coalition government enacted a number of politically ambitious fiscal and structural reforms in 2025, these measures are insufficient to offset negative fiscal pressures resulting from rising interest costs, additional defense spending, persistent aging-related expenditure pressures, and weaker revenue performance.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The downgrade means Belgium has lost its double-A rating at two of the three major credit assessors, potentially forcing some funds with ultra-strict investment criteria to sell the country’s bonds. The decision chips away at the credit status of a country that stands out in the euro zone for its relative wealth, but also for its huge public spending commitments and a corresponding path of spiraling debt. It will add pressure on the five-party coalition that rules Belgium just as politicians struggle to agree on how to cushion the impact of rising energy prices set off by the war in the Middle East. The government has been split on the level of support to offer to consumers.“There is no money,” Prime Minister Bart De Wever, from Flemish nationalist party N-VA, warned this week in parliament, in contrast to other coalition members calling for broad aid for citizens. Attention will now turn to S&P Global Ratings, whose own review of Belgium is due next week. That company’s assessment of the country at AA — two notches above the scores of rivals Fitch and Moody’s — has been skewed toward a possible downgrade for the past year.The scale of Belgium’s fiscal woes was laid bare in Washington on Wednesday with the publication of the International Monetary Fund’s Fiscal Monitor. The outlook therein showed budget deficits consistently above 5% of output and steadily worsening.The fund’s trajectory envisages debt rising at a pace second only to the US among advanced economies, with Belgium’s pile of borrowings seen to reach 122% of gross domestic product within half a decade. That would be the biggest in Europe after Italy.In February, the IMF said that the government’s efforts at deficit reduction this year are “welcome” but “still do not bring about the necessary adjustment to reduce deficits and debt vulnerabilities.”Belgium is among European Union nations that have been placed in the bloc’s excessive deficit regime for failing to keep deficits under 3% of GDP. While the worsening of its public finances has had muted market impact, Bloomberg Intelligence strategist Huw Worthington and analyst Thinh Nguyen warned this week that investor scrutiny could be about to intensify, not least given how it has done so with regard to France.Belgium is struggling to reconcile budget costs related to aging, alongside the commitment to raise security-related outlays to reach NATO’s new spending target of 5% of output by 2035, as agreed by leaders in June. The country backed that plan but remains among the group’s lowest spenders, according to the alliance’s latest estimates. The government has approved selling a 20% stake in state-owned bank Belfius as part of this budgetary effort and defense ramp-up.“The fiscal challenge facing Belgium now appears to exceed the political and institutional capacity available to address it,” Moody’s said. “The government has enacted a substantial and politically difficult reform package, but the measures still fall short of what would be needed to stabilize debt.”—With assistance from Sylvia Westall.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.