Moody's cuts Belgium ratings by 2 notches

NEW YORK (Dec 16): Moody's on Friday cut Belgium's credit rating by two notches, saying the euro zone debt crisis increases funding risks for countries with high public debt burdens.


Concerns about Belgium's economic growth prospects and its banking
system, particularly with contingent liabilities stemming from the
Dexia group bailout, also contributed to the decision, Moody's said.

"The fragility of the sovereign debt markets (in the euro zone) is
increasingly entrenched and unlikely to be reversed in the near future,"
Moody's said in a statement.

"It translates into heightened potential for funding stress for euro
area countries with high public debt burdens and refinancing needs
like Belgium," it added.

Belgium's government declined to comment on Moody's decision.

The ratings agency lowered Belgium's local- and foreign-currency
government bond ratings to Aa3 from Aa1. The new rating has a negative
outlook, which means another downgrade is possible in a couple of
years.

The negative outlook reflects ongoing concerns about Belgium's
government finances and economic growth prospects in the euro zone due
to the debt crisis, Moody's sovereign credit analyst Alexander
Kockerbeck told Reuters in an interview.

Belgium on December 5 formed a new six-party coalition government
after a caretaker administration approved a budget with austerity
measures at the end of November. The budget agreement came just hours
after Standard & Poor's cut the country's rating to AA from
AA-plus.

The new government must satisfy demands of the Dutch-speaking
Flemish majority for devolution of further powers to Belgium's regions,
and may have to redraw a budget that economists say is based on too
optimistic a growth forecast.

"The recent experience in Belgium is that the political bargaining
process can be very challenging and it could be that the new government
may need to agree on additional measures," said Kockerbeck.

"It is challenging certainly for the government to come up with
additional measures given the downward revisions of economic growth
that we experienced in the euro zone as a whole," he added.

Earlier on Friday, rival Fitch Ratings placed Belgium's AA-plus
rating on credit watch negative, signaling a downgrade is possible
within three months.

Standard & Poor's, which rates the country at AA, also has the
rating on watch negative as part of a broader review of 15 euro zone
countries.

On Thursday Moody's cut the rating on Dexia's French division Dexia
Credit Local to Baa1 from A3, citing concerns about the
comprehensiveness of the funding guarantee scheme provided to the unit.
It threatened the division with more cuts.

In October, Belgium, France
and Luxembourg agreed to guarantee the bond funding raised by the
division for the next 10 years, up to 90 billion euros ($116.6 billion).
- Reuters