Will Belgium Join the PIIGS Sty?

Belgium's political crisis can lead to financial crisis, putting further strain on the Euro/

Contact Editor
Dr. Amiel Ungar, | updated: 14:37

Rabbi Ilan Adler
Rabbi Ilan Adler
Israel National Radio


The Euro, the beleaguered European currency faces problems from an unexpected source-Belgium, the home of the European Union. Hitherto the problem area had been considered the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) countries. Greece and Ireland have already received rescue packages and Spain threatened to be the next domino putting pressure on the Euro. Now Standard & Poor's financial rating agency threatens to lower Belgium's credit ratings unless the country succeeds in forming a coalition government. This is  something that is has failed to accomplish since the June elections given the linguistic divide in Belgium between French and Flemish speakers and the demand by the Flemish parties for greater regional autonomy.  Richer Flemish Flanders wants to transfer less money to the poorer French regions of the country's south.

Expressing the frustration following 185 days of fruitless negotiations, Bart De Wever, the Flemish winner of the last elections, described Belgium as a “failed” state and the “sick man of Europe” (a term that the Russian Czar Nicholas II had used in the 19th Century to depict the Ottoman Empire) in an interview in the German Der Spiegel and opined that Belgium had no long term future. De Wever's outspokenness may have been natural but it obviously did not inspire investor confidence.

Standard & Poor's believes that a stable government is necessary to make the decisions to cut the countries budgetary debt and sell the package to the citizens of Belgian. Standard & Poor's warning follows similar gloomy reports by the International Monetary Fund. The IMF report card for Belgium noted "the outlook is uncertain and risks are predominantly on the downside." Belgium warned the IMF has to send a strong message by getting its public debt in order. The lower a country's credit ratings the higher the interest it pays to refinance its public debt and Belgium has the third highest public debt in the eurozone.

The Belgian press reacted swiftly to this embarrassing news. The French language Echo castigated the politicians saying that they had been warned by business leaders, a contest and even journalists that it was not particularly smart for Belgium to make a spectacle of itself in front of the economic speculators during the financial crisis of the Euro zone. Le Soir for its part noted that the rating agency had threatened to lower its rating by one notch if the government is not formed in 6 months and felt that Standard & Poor's was actually being lenient with a country that had made itself a laughing stock due to its coalition crisis.