The budgetary situation could lead the rating agencies to review the note of Belgium downwards. If this is the case, the public finances of the State will feel the concrete consequences.
Despite the will of the federal government to reduce The public deficit, it will exceed the initial objective of 3%. A disappointment for Bart de Wever, which can however advance attenuating circumstances. Arizona, now, is especially awaiting the European assessment of its multi -year budget plan. The Commission should grant the plan for seven years, despite the many Belgian inconsistency. Rating agenciesthey could be less mild. If Standard & Poors (S&P) has not (yet) revised the note of Belgium downwards, it expressed strong concerns. Just like the Fitch and Moody’s equivalents, which have announced a negative perspective. The union resistance is cited by S&P as an obstacle to the rapid application of government plans.
Degradation of the Belgian note: what would be the consequences?
What if the Belgian note was actually degraded in the near future? In principle, this means that it will be necessary pay more to borrow money on the markets. A way to dissuade to go into debt more. Interest reimbursements on Belgian debts are already increasing: from 10.7 billion this year to 16.6 billion by 2029.
“If the note of Belgium was indeed lowered to AA-, it could lead to an increase in loan costs for the Stateconfirms Mikael Petitjean, professor at the Louvain Business School. If we compare to France, the cost of the debt could then increase by around 15 basic points On bonds at 10 years. All other things being equal, it could represent, At the big ladle, 100 to 150 million euros in additional interest charges in the first year.»
“If Belgium’s note was actually lowered to AA-, this could result in an increase in loan costs for the State.”
Micael petitjean
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Above all, avoid falling below aa-
For the professor, Above all, you must avoid falling below “Aa-“ Because some institutional investors may have to reduce their exposure to Belgian debt. “A certain number of pension funds, sovereign funds, insurance companies, and certain common investment funds are linked by internal mandates which require mainly investing in high -quality obligations, often AA or better. A drop in the note under “AA-” could therefore make Belgium less eligible for these portfolios ”, he warns.
“The most silly public expenditure is the expense of interest load, Complete the economist Etienne de Callataÿ (Orcadia Asset Management). No one can pay higher interest rates. But the ratings are not like a government bulletin, he says; They may above all induce an increase of spreadthat is to say the interest rate difference between what Belgium pays and its neighbors. ”
“The most stupid public spending is the expense of interest load.”
Etienne de Callataÿ
Germany, for example, is considered the best borrower in Europe. “If the interest rates trend is right, with a negative review of the note, they would drop slower in Belgium than in Germany. What is important here is not so much the level, but the gap with our neighbors. ”
Finally, you should know that France’s note (“AA-“) is currently less good than that of Belgium. That said, the country benefits from a special, privileged position: it is one of the two pillars of the euro zone (with Germany). “”For Belgium, which has a much more modest economic weight, a degradation of the note under AA- could have more marked effectsespecially on rate differences (spreads) vis-à-vis Germany. “
