Moody's cut means Belgium must hit deficit goal

Sat Dec 17, 2011 9:40am EST
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By Philip Blenkinsop

BRUSSELS (Reuters) - The downgrade of Belgium's credit rating by agency Moody's underlines the need to cut the budget deficit next year to 2.8 percent of GDP as agreed by the ruling coalition, Belgian Finance Minister Steven Vanackere said on Saturday.

While the deficit target and measures to reach it have been agreed by Belgium's six-party ruling coalition, economists expect more austerity steps may be necessary given a weakening economic outlook for the country and the euro zone as a whole.

Vanackere told Reuters in an interview that if periodic checks during 2012 showed Belgium was off course to achieve the target, new measures would be implemented.

"The 2.8 percent will be achieved. If growth estimates are downgraded in March, that will of course imply new measures to guarantee the result of 2.8 percent," he said.

"2012 will be a year in which we will have several budget controls. We will be very active on that level and we will achieve the 2.8 percent," he said.

Moody's cut Belgium's rating by two notches late on Friday to Aa3 from Aa1, citing deteriorating financing conditions in the euro zone, risks to economic growth and the costs of bailouts of banks such as Dexia (DEXI.BR: Quote).

"No finance minister is glad when there is a downgrade of a country, but at the same time it is not a big surprise," Vanackere said.

"Everyone knows that in the whole of the euro zone there are downgrades and Belgium in particular, with a large banking and financial sector, is of course vulnerable through the immense operations to save the banking sector."   Continued...