UPDATE 1-Belgium faces threat of S&P debt downgrade

* S&P says Belgium could be downgraded within months

* Ratings agency says general fiscal outlook worrying

* Belgium has debt-to-GDP ratio of around 100 percent

(Adds details, background, quotes)

BRUSSELS, Dec 14 (BestGrowthStock) – Belgium’s failure to form a
government since elections in June threatens its ability to
manage its debt and could lead to a downgrade of its sovereign
rating within six months, Standard & Poor’s said on Tuesday.

The strong warning to Belgium, which has a debt-to-GDP level
of about 100 percent, places it firmly in the category of
riskier states in the euro zone debt crisis, with Greece and
Ireland already receiving EU help and Portugal and Spain
threatened.

Standard & Poor’s said it had concerns about Belgium’s
general fiscal outlook, its ability to bring its budget deficit
down to a target of 4.1 percent next year, and the government’s
gross borrowing requirement of around 11 percent of GDP.

“We believe that Belgium’s prolonged domestic political
uncertainty poses risks to its government’s credit standing,
especially given the difficult market conditions many euro zone
governments are facing,” S&P said in a statement.

“We could lower the sovereign rating on Belgium one notch if
we conclude that the lack of consensus will result in the
government not being able to stabilise its debt trajectory.

“If Belgium fails to form a government soon, a downgrade
could occur, potentially within six months,” it said.

The statement followed an announcement that S&P had lowered
the outlook for Belgium to ‘negative’, while maintaining its
rating at AA+/A-1+.

Belgium has been without a government since June, when a
parliamentary election failed to produce a clear winner. Six
months of negotiations over forming a coalition government have
failed to clinch an agreement. There is now the possibility of a
new election being held, if negotiations do not succeed.

Belgium has largely escaped the pressures that have been
brought to bear on bond markets in Greece, Ireland, Portugal and
Spain, although in recent weeks yields on 10-year benchmark
bonds have risen, with the spread over German bunds widening.

The International Monetary Fund said on Monday Belgium
needed to quickly articulate a plan to reduce its budget deficit
to prevent debt market concerns from undermining its economic
recovery.

Belgium’s real gross domestic product is expected to grow
1.7 percent in 2011 versus about 2 percent in 2010 — a rate
driven by strong exports and inventory rebuilding.

“The outlook is uncertain and risks are predominantly on the
downside,” the IMF said.

“Financial market concerns about sovereign risks in the euro
area, Belgium’s high public debt and political uncertainty could
dampen confidence, increase financing costs for the economy, and
undermine the recovery,” the IMF said.

The IMF said Belgium needed to develop and communicate a
comprehensive strategy to reduce its budget deficit to 3 percent
of gross domestic product by 2012 from 4.8 percent in 2010.

UPDATE 1-Belgium faces threat of S&P debt downgrade