Moody's warns of possible Belgium downgrade

7th October 2011, Comments 0 comments

Credit ratings agency Moody's on Friday warned Belgium could be downgraded, as the country moved to bail out troubled bank Dexia.

"Moody's Investors Service has today placed Belgium's Aa1 local and foreign currency government bond ratings on review for possible downgrade," the firm said in a statement.

Moody's cited a barrage of potential pitfalls that could beset the small northern European nation.

In particular Belgium could be vulnerable to increases in the cost of market borrowing for indebted European countries, weaker growth and the potential need to spend more bailing out failing banks.

The comments came as the Belgian finance minister, Didier Reynders, indicated Friday that his government is aiming to increase its stake in failing Belgian-Franco bank Dexia.

"In the negotiations with our French partners, we are going to find ourselves putting up great guarantees, but also strengthening our position within Dexia bank in Belgium," Reynders told reporters after a cabinet meeting.

Moody's said: "The likelihood for the need of additional government measures to support individual banks or the system has increased, as illustrated by the significant challenges now facing the Dexia Group.

"It is unclear how far additional support measures would be likely to weigh on the balance sheet of the government."

© 2011 AFP

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