Belgium's 'fiscal red light' also sees government bond yields soar... Best since 2011

“Possibility of credit rating downgrade if energy prices soar and fiscal deficit expands.”

(Brussels = Yonhap News) Correspondent Hyun Yun-kyung = The interest rate on 10-year government bonds in Belgium, which has the highest national debt and fiscal deficit among the 21 countries that use the euro, rose to the highest level in 15 years.

According to the Belgian business magazine Leco, the average interest rate on the 1.3 billion euros (1.9 trillion won) raised by Belgium through the issuance of 10-year government bonds on the 26th (local time) reached 4.41%, the highest level since November 2011. On this day, Belgium issued not only 10-year government bonds but also government bonds with maturity dates of 2033 and 2040, borrowing a total of 2.8 billion euros (about 4.1 trillion won).

As inflation intensifies due to the rise in energy prices caused by the war with Iran, central banks around the world are expected to raise interest rates, and growing anxiety over public finances is believed to have fueled the rise in government bond yields.

As borrowing costs rise, there are concerns in Belgium that the 'debt snowball effect', in which interest burdens further increase debt, may be brought forward to 2029 rather than the originally expected date of 2031.

Belgium's public debt currently amounts to 720 billion euros (about 164 trillion won), the fourth highest in the European Union (EU) after Greece, Italy, and France. The debt-to-gross domestic product (GDP) ratio is about 110%, which is much higher than the EU average of 82.9%.

The Brussels Times reported that international credit rating agency S&P maintained Belgium's sovereign credit rating at AA- and assessed the rating outlook as 'stable', but warned that the credit rating could be downgraded if energy prices soar.

S&P pointed out that Belgium's economy is solid and its industry and economic structure are diversified, but it is vulnerable to energy price shocks, and predicted that its credit rating could be affected if the country's massive government debt and fiscal deficit, which is the highest in the euro zone at 5.3% of GDP, becomes larger than expected.

Belgium is considering harsh austerity measures, such as reducing medical, pension and social security benefits and increasing taxes, due to its fiscal deficit. However, as opposition from all walks of life intensifies, protests erupt and political consensus on the budget is delayed, increasing financial pressure.

Meanwhile, in neighboring France, the 10-year interest rate recently exceeded 5% for the first time since 2002 as social chaos continued due to large-scale protests against poor educational environments and high prices, and as anxiety about public finances increased.