Eurozone debt crisis spreads to Belgium on rising political risk

Wednesday, December 15, 2010
By Paul Martin

Europe’s debt woes have moved closer to the core of monetary union after Standard & Poor’s threatened to downgrade Belgium over the failure of Flemings and Walloons to form a government

By Ambrose Evans-Pritchard
Telegraph.co.uk
15 Dec 2010

The warning comes a day after the International Monetary Fund said Belgium “urgently needed” to control spending as public debt pushes above 100pc of GDP. “A clear plan is needed to contain contagion from abroad,” it said.

The yield spread on Belgian 10-year bonds has ballooned to 102 basis points over German Bunds, raising fears of a funding squeeze next year. S&P said the country needs to refinance debt equal to 11pc of GDP next year, leaving it “exposed to rising real interest rates”.

“It’s ugly for our reputation,” said Jean Deboutte, head of Belgium’s debt office. “This is bearable but the premiums are mounting little by little.”

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