Moody's cuts Belgium ratings by 2 notches

Fri Dec 16, 2011 6:36pm EST
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By Daniel Bases and Walter Brandimarte

NEW YORK (Reuters) - 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.   Continued...