Belgium’s credit rating cut two notches by Moody’s.
Moody’s Investors Service cut the credit rating for Belgium by two steps yesterday. The rating agency cited high borrowing costs and fallout from the Dexia SA bank crisis as reasons for the downgrade. Belgium was lowered from a debt rating of AA1 to AA3 that follows a similar downgrade by Standard and Poor’s last month by one step. Fitch rating agency has declared they may also downgrade Belgium’s debt but has yet to move.
The downgrade of Belgium’s credit may not be the end but just the beginning of downgrades by rating agencies for euro zone countries as the debt crisis continues even after the EU Summit Agreement was reached a week ago on December 9, 2011 and the coordinated central bank actions taken to stem the contagion effects were implemented in late November. We though it was possible that countries in Europe would begin getting downgraded by more than one step a few weeks ago and anticipate weakness in global demand for equities in the region as the crisis continues to unfold. The dollar euro may be a good meter for how investors view progress of euro zone debt crisis for the next few days.