2010-06-09

Belgian Debt Fears

Yesterday I posted Socionomics Alert—Breakups in Europe to begin? Here is the first sentence: "This is related to social mood, not the current debt crisis."

My post was about the political change coming about in Belgium (Flanders wants to separate from Wallonia) and that there are trends other than debt working to break up Europe. However, that doesn't mean this political trend doesn't impact the debt markets:
Political inertia complicates Belgian debt fears (Put the headline into Google if you can't read it)
Interest rates on 10-year Belgian government bonds jumped from 3.15 to 3.50 per cent last week and investors are demanding a mounting premium to hold the debt over corresponding German paper.

Belgium's debt is currently at 99 per cent of its gross domestic product, the highest in the eurozone after Greece and Italy, and is forecast to exceed GDP by the end of the year.

Yet no political party is campaigning for an explicit belt-tightening mandate. Despite rising unemployment and sluggish growth, the economy has barely featured in the campaign.

...The rise of separatist parties in Flanders does not spell an imminent break-up of the country, but it makes Belgian politics even more unpredictable than before. If the polls are borne out on Sunday, it is not clear who will have a mandate to become prime minister.

"Political uncertainty in nothing new in Belgium," admits Ms Gay. "It's just that we've never had it at the same time as a sovereign debt crisis."
Given the social mood, I'd say Ms Gay is a bit too gay.

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