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Oct. 7 (Bloomberg) -- Belgium’s Aa1 local- and foreign- currency ratings were placed under review for a downgrade by Moody’s Investors Service because of rising funding risks for euro region nations with high levels of debt and additional bank support measures which are likely to be needed.
The review will focus on the vulnerabilities of the Belgian public debt in the current euro area sovereign crisis and potential costs and contingent liabilities that the government may incur in supporting Dexia SA, Moody’s said in a statement today. Moody’s will also assess how the risks for the growth outlook of the economy and the government’s fiscal and economic plans may impact the country’s debt trajectory.
The downgrade warning comes as France, Belgium and Luxembourg seek to protect their local banking units of Dexia from the debt crisis threatening the heart of Europe’s financial system. Belgian Prime Minister Yves Leterme said he’ll do whatever it takes to safeguard the bank in Belgium. Dexia’s troubled assets may total as much as 190 billion euros ($256 billion).
Spain and Italy, the euro region’s fourth- and third- largest economies, were downgraded earlier today by Fitch Ratings on concern they will struggle to improve their finances as Europe’s debt crisis intensifies. Spain had its foreign and local currency long-term issuer default ratings cut to AA- from AA+, while Italy had the same set of ratings cut to A+ from AA-, the company said today. The outlook for both countries is negative. Fitch also maintained Portugal’s rating at BBB-, saying it would complete a review of that ranking in the fourth quarter.
--Editor: Greg Storey
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