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Moody's Takes S&P's Place - Downgrades Belgium By Two Notches To Aa3
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- BELGIUM'S CREDIT RATINGS CUT 2 LEVELS TO Aa3 BY MOODY'S
full note:
Moody's downgrades Belgium's credit ratings to Aa3, negative outlook
Short-term ratings affirmed at Prime-1; concludes review initiated 07 October
Frankfurt am Main, December 16, 2011 -- Moody's Investors Service has today downgraded Belgium's local- and foreign-currency government bond ratings by two notches to Aa3 from Aa1 with a negative outlook, while affirming its short-term ratings at Prime-1. Today's rating action concludes Moody's review for downgrade of Belgium's sovereign debt ratings, which was initiated on 07 October 2011.
The main drivers that prompted the downgrade are:
(1) Heightened risks posed by the sustained deterioration in funding conditions for euro area countries with relatively high levels of public debt, like Belgium; and the potential adverse impact these risks may have on the Belgian government's fiscal consolidation and debt-reduction efforts.
(2) Increasing medium-term risks to economic growth for the small and very open Belgian economy due to the need for ongoing deleveraging and fiscal restriction in the euro area. This is likely to add to the challenges of placing the country's public debt on a downward trajectory.
(3) New risks and uncertainties for the Belgian government's balance sheet stemming from the banking sector, particularly in connection with the contingent liabilities emanating from the run-off process of Dexia Credit Local (DCL).
RATIONALE FOR DOWNGRADE
The first driver underlying Moody's decision to downgrade Belgium's debt rating is the fragile sentiment surrounding sovereign risk in the euro area. The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future. It translates into heightened potential for funding stress for euro area countries with high public debt burdens and refinancing needs like Belgium. Sustained increases in funding costs could also significantly complicate the reduction of general government deficit ratios to stabilise and reverse Belgium's high public debt in relation to nominal GDP -- currently close to 100%. Moreover, the probability of further more serious confidence shocks on the euro area bond markets -- up to and including sudden stops in funding - have risen recently, albeit from a very low base.
The second driver of Moody's rating decision is the significant increase in the medium-term risks to economic growth, over and above any normal cyclical adjustment, in the small and very open Belgian economy. This is in part driven by the deleveraging underway across the euro area financial, corporate, household and government sectors, and is negatively affecting Belgium's export demand. Furthermore, uncertainties about the euro area debt crisis (management) are continuing to negatively impact the funding conditions for banks with potentially negative consequences for domestic economic activity. The further weakening economic growth outlook also complicates the government's ability to achieve its medium-term fiscal consolidation plans and may necessitate additional fiscal measures beyond the roughly 11 to 16 EUR billion yearly planned for the coming three years. This could further weigh on economic growth. Belgium's recent experience of political bargaining indicates that consensus on additional measures can be difficult to achieve.
The third driver of today's rating action is the emergence of new risks which create greater uncertainty around the implications of banking sector contingent liabilities for the government's balance sheet. There is a significant risk that the dismantling of the Dexia group, and especially the run-off process of Dexia Credit Local (DCL), will result in increases in government debt metrics, although Moody's notes that the precise extent of any increase remains highly uncertain. Following the nationalisation of Dexia Bank Belgium (DBB) at a cost of EUR4 billion in October this year, the Belgian government's exposure to the group remains considerable through explicit debt guarantees and loan exposures to DCL through the now nationalised DBB. Combined, Moody's estimates these current exposures as representing close to 10% of the country's GDP.
Furthermore, in conjunction with the French and Luxembourg governments, the Belgian government has agreed to guarantee a large share of the new funding issued by DCL for a period of 10 years. An agreement to that effect was announced in October, but the three governments have since re-opened discussions on the support package and are moving towards the implementation of a temporary guarantee scheme of six months with the maximum term of drawings and ceiling recalibrated to the liquidity needs of the period before putting the definitive guarantee in place. While Moody's says that the precise outcome of these discussions is difficult to predict at this stage, the original agreement and the funding needs of DCL suggest that the Belgian government's total exposures to the group will likely rise and, in Moody's views, could reach between 15% and 20% of GDP.
Overall, Belgium's Aa3 rating weighs the mentioned risks against important strengths, such as the country's net international creditor status and the relatively healthy balance sheets of the corporate and household sectors. Moody's also recognises that the recent talks among the country's eight political parties have finally succeeded in resolving the longstanding political impasse. With the formation of a new government, the country may be in a better position to adopt more sustainable fiscal policies and to undertake structural reforms.
Nevertheless, an immediate and major challenge facing the new government is the impact of weaker growth on the country's fiscal consolidation efforts and the resulting need for additional measures to meet the medium-term deficit and debt reduction targets.
RATING OUTLOOK
The rating outlook is negative due to ongoing risks and uncertainties for public finances and economic growth in the context of the euro area debt crisis.
WHAT COULD MOVE THE RATING UP/DOWN
Economic and fiscal policies paving the way for a substantial and sustainable trend of declining general government deficits with increasing primary surpluses that lead to a significant reversal in the public debt trajectory would be credit positive. Conversely, further intensification/crystallization of the risks constituting the three main rating drivers of today's rating action would be credit negative.
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Moody's, Bitchez. I think Uncle Warren is shortin Belgium this week.
Zippy put it best: zombies rule Belgium.
http://1.bp.blogspot.com/_yAdxTp2HDQM/S-WWgGxh7_I/AAAAAAAAByA/m4tsgXhlM-...
it's a caretaker Govt in Belgium, for a year... best thing to happen to a country since the last time there were no politicians 'running' a country (into the ground)
Zero Govt: things look better immediately
Big government = best when run well, horrible when corrupt
Small government = low overhead when run well, minimally damaging when corrupt
No government = best for revolution for a short time, anarchy for a longer duration
They don't call them Moody for nothing!
-John
http://www.youtube.com/watch?v=Jo7a5BAj7FQ
about time some good news
Kick them in the crotch when no one can get out of their positions. The ratings agencies are amoral as they are wrong.
oh truly!
no one is ever going to pay a cent.
but all that paper needs to be rated as if its a gold mine.
The fact that they downgraded two notches is just another glaring example that ratings agency are an epic fail. So, how does it go.....you were asleep at the switch, and then realized your rating is way too high one day?
t
"that made my laugh."
now that your laugh has been created, how do you plan to use it?
that made me laugh.
spilled a drink on my keyboard. as you can see i had some issues. i am using my laugh to convince myself redheads are where it is at - http://hedge.ly/gFWVSm
Good news?
Not for gold my friend.
How do you like dem waffles?
Van Rumpoy is choking on them, Burroso is crying on them ...the European unemployment cues have never had such a pair of unemployable wasters add to their numbers
Moody's downgrades S&P servers to BB- with an unfavorable outlook cuz rookiez r punk'd yo!
ho hum
now, just lets see France and i can safely short euro into weekend
fuck and euro is still trying to go up...
Some1 either does not read ZH or manipulating the market at this point.
where's SD?
/flail those hyperactive arms!/
OUT OF MY WAY! GOING DOWN FAST!
Thank god we have a new gay president who doesn't speak our language and has as much brains as my goldfish....
Didn't your goldfish win that nobel prize?
not that there's anything wrong with that, but it is not very flattering to your...
...you did say goldfish...?
we're all thought of our sodden friend when we saw the news, i'm sure
your mission, should you choose to accept it is to let us know if "belgian austerity" is as much fun as it sounds!
Goldfish..I thought it was Gerbels.....they liked gerbals..or was that Goebels...
We don't do austerity, our president is uber socialist and only believes higher taxes will save us....
50% on salaries now and if that moron gets his way 58%.....
A retired manager should have the same pension as any factory worker...
Young people who lose their jobs are fucked...
Taxes for everybody who own a asset...
'the rich' have to pay for it all, but whenever you own something and have a job, that means you're rich.... How fucked up is that?
Belgians!
http://www.youtube.com/watch?v=19fcN3VaXs4&feature=related
DEXIA, BITCHEZZZZZ
Cheers!
The world is CCC.
+1 ... maybe less than CCC.
The world is FF+: fucking fucked, bigtime.
S&P pwned by Moody's. Ah shucks, reality might finally set it and their could be another Black Monday coming into play.
http://www.reuters.com/article/2011/12/16/eurozone-idUSL6E7NG46A20111216
So.
Monday market melt up here and in the EU if todays action after all the downgrades of the banks yesterday is any indication.
We base our downgrade on the new plan by the B_______ government announcement of the issuance of a new credit vehicle combining both sprouts and waffles. We feel this is a failure of both governance and good taste.
When will moody downgrade the US? Never, that's when... or maybe from AAAA to AAA!
As an Englishman, I've been so put out by the French Finance Minister's comments about the UK recently, I've felt the need to put down my cup of tea and ask myself the following:
Just what is it with these filthy cheese-eating surrender monkeys?
Dogs - one and all. Fuckers to boot.
Don't worry, your two Country's will be killing each other, at war, within a year. It starts with name calling and then escalates upwards in the violence chart.
it will be a short war cos they both got nukes, but the french own their while the brits rent from uncle sam by the time they get permission to use them it will be all over
hot damm 2 min war, with no comercial breaks
... and they should have learned their lesson at Agincourt. But no!
breathe deeply into the illusion of national identity. cloak yourself in the seeming hatred for another based on a corporate oligarch's sideshow psychology.
.....next....
This is rally the dow back over 12000 Monday. Surely as I have blonde hair and blue eyes..and a tail.
so CNBC circus just annonced the Belgium vafles downgrade after 5 PM when all FX servers are closed. How cute...
Bastards, they could not do it 10 min ago? i am sure they had the info.
So now Belgium steps out 27 billion Euros from EFSF?
This is likely just the warning for next week that some other major downgrades are coming. Can't just downgrade an AAA out of the gate, you gotta start small
so belgium gets downgraded because europe is doing bad?
We have brussels.
Capital of europe where all the corporate headquarters are in europe, compaire it to what new york is for america, london for england.
And we make a lot of money from them, so if the companies all over europe go bad, we go bad.
bristles would be more effective you know.
could wash of the grime.
at least get the streets cleaned up.
You have to consider the source.
Moody's are a para agency of the US.
Otherwise they (and S&P) would have died the death they deserved in 08.
Think about the downgrade of US back in August. Stage managed. Timed so that it would not hurt, but giving license to downgrade others later.
It is all orchestrated. Most everything we see is scripted. Occasionally we get glimpses of unscripted moments and raw data. This is where ZH shines. Thanks to the Tylers and posters.
Of course, Eurozone yields fall as the ECB/IMF do backdoor QE through the Eurozone banks. Watch the ECB pump reserves into the banks, then encourage the banks to buy sovereign debt and bid up the price.
The banks are stupid to agree and I am trying to figure out which banks are buying sov debt.
But the point is that the Eurozone is playing the same game OUR Fed is - building massive reserves and purchasing sov debt no one wants.
http://confoundedinterest.wordpress.com
The game is coming unglued.
I do believe next week is going to be interesting...retails sales are down in the EU....bank runs by the billions..the world selling the eu bonds...oh boy..I quit eating popcorn..I have moved on to the 30 year old fruitcake....
Well I guess that answers my question. Didn't have to wait 12 hours even.
btfd on belgium microbrews
It's ok... as long as everybody else gets cut as well.
We can exist in mediocrity and mutually lowered credit ratings... because where else will the money go?
Yea... it'll be ok.... right?
Not even reported over at the WSJ.
The US has over $16 trillion in debt since Geithner guaranteed GSE debt. We make Greece look thrifty! Look at the chart!
http://confoundedinterest.wordpress.com
How does this affect their chocolate? Because other than that I could care less...Just being honest here.
Kyle Bass and some other big fish think Europe will implode 1st qtr. in 2012. Might be the time then to buy some physical metals...but if the ensuing panic is so bad, the futures price of silver might show $23, but the physical price might be $30+ Thoughts?
Does anyone think 2012 Philharmonics are going to be "collector peices" being that IMHO it will be the last year the word "Euros" appears on the coins? I may have to pick one up.
Downgrade overview of the last couple of days:
Fitch Downgrades 8 Global Banks Including BNP, SocGen, BofA, Deutsche, And Morgan Stanley
Moody’s downgrades five Hungarian banks
Moody’s Downgrades Belgium By Two Notches To Aa3
Fitch Revises French Outlook To Negative
Moody’s Revises Ontario Outlook To Negative
FITCH PLACES BELGIUM, SPAIN, ITALY, IRELAND, SLOVENIA AND CYPRUS ON RATING WATCH NEGATIVE
S&P Warns Of Increased Corporate Bond Downgrade Risk Following Sovereign Action
WTF, any Euro nation that goes along with this has leaders that will in time meet the same fate as Mussolini.
http://www.youtube.com/watch?v=EPcWHBPYOSU&feature=g-all-f&context=G2f47aeaFAAAAAAAABAA
It wasn't too long ago that toxic assets were rated AAA.
The future is now. Be prepared.