Credit ratings agency Moody's has downgraded its outlook for Flanders, Wallonia and the French Speaking Community Government (Wallonia-Brussels Federation) over concern for the country's finances.
The move follows a similar downgrade for the overall Belgian State last week. Ratings agencies assess how risky it is to invest in a certain company or government. If a government's rating is lowered, it can mean that lenders will charge higher interest rates to compensate for the perceived risk, and it will cost more for a government to borrow money on international markets.
Citing concern for Belgium's public finances, last week Moody' s lowered the country's outlook from "stable" to "negative". However, the country's sovereign debt rating remains at "Aa3", where "Aa" signifies very low credit risk, and "3" places Belgium at the lower end of this category.
Moody’s has now also downgraded the outlook for Flanders, Wallonia, and the French Speaking Community Government from "stable" to "negative".
The agency highlighted the close institutional, operational, and financial ties between the regions, communities, and the Belgian state, and said its concerns about Belgian public finances extend to regional and community accounts.
Financial ratings, however, remain unchanged: "Aa3" for Flanders, "A3" for Wallonia, and "A2" for the Wallonia-Brussels Federation.
Excessive deficit procedure
The downgrade comes as Belgium is in the middle of an excessive deficit procedure launched by the EU regulators in July. Belgium is one of seven EU Member States under fire for overspending, as its annual budget deficit and growing overall debt are beyond acceptable limits set by EU law.
The Belgian Federal Debt Agency has confirmed that the country's total net debt surpassed €500 billion in September.
A major task for Belgium's incoming governments will be deciding how to reduce the budget by around €28 billion over the next four to seven years, either by cutting spending or increasing government income.
