Downgrade spurs government formation
Nearly 17 months after their general election it took a downgrade by a credit ratings agency to force six political parties to agree a budget and form a government.
Yesterday Standard and Poor’s (S&P) downgraded Belgium’s sovereign credit rating from AA+ to AA. Fears over market reaction and the cost of borrowing enabled the Socialist Party (PS) leader, Elio di Rupo to secure an agreement with all of the parties to set the 2012 budget, breaking the deadlock to forming a new government.
The agreement also set the 2013 and 2014 budgets with the new government set to reduce the budget deficit from 3.6% this year to 2.8% next year with the goal to balance the books by 2015. The government will have to find around €11.3 billion in savings.
S&P said that the downgrade was due to difficulties with Belgium’s banking system, the bank Dexia recently asked for French and Belgian government support, and the government’s inability to respond to economic problems.
Belgium’s politicians have been in deadlock about the formation of a government since their general election in June 2010. Elio di Rupo will now be asked by King Albert II to form a Cabinet as quickly as possible.