Belgian finance minister warns of speculators' wrath

21st December 2010, Comments 0 comments

Belgium will face an onslaught from speculators if it does not take measures to reassure investors about its finances early next year, the finance minister warned Tuesday.

Belgium's borrowing costs have risen in recent weeks and a major credit ratings agency warned that it could downgrade its sovereign debt because the country remains without a new government six months after elections.

Finance Minister Didier Reynders told RTL television the caretaker government will have to take action to fend off speculators early next year if feuding Flemish and French-speaking politicians fail to form a government.

"I not only fear but I am sure that speculators will attack Belgium if in the first quarter of next year decisions are not taken by a new government or the current affairs government," he said.

The country's economy is healthy and stable, he said, pointing out that the weakness laid in the fact that a new government has not been formed since June elections.

"If we let time pass the measures we will need to take will be more and more difficult," Reynders said.

"The situation is serious but it is far from desperate. I want to reassure Belgians," he said.

The Belgian public deficit is slated to go down to 4.1 percent of national output in 2011 from six percent this year, but Reynders said earlier this month that the country should aim to slash it to 3.7 percent next year.

Debt ratings agency Standard & Poor's warned Belgium last week that it could cut the country's credit score within six months if Flemish and French-speaking parties failed to form a government soon.

The fiscal health of eurozone countries has come into sharp focus since multibillion-euro bailouts were needed for Greece in May and Ireland this month, with concerns growing about Portugal and Spain.

European Union leaders agreed at a summit last week to create a permament crisis mechanism to shield the euro from future debt crisis. The system will replaced a 750-billion-euro backstop that expires in 2013.

Reynders, whose country holds the European Union's rotating presidency until December 31, said the best way to ward off speculators is to state: "We will not let any eurozone state fall."

© 2010 AFP

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