Belgium: The forgotten pig

We are all well aware of the famous PIGS countries, but we seem to forget one tiny country in Europe. Yes, the one without any government since 284 days (and counting). The waffle & chocolate country will win the world record for not having a government, beating Iraq with 289 days. Good job Belgium!

While some people decided to take it to the streets in order to tell the politicians to "get a move on", others are getting more desperate to create political parties, such as Tania Derveaux which offered a blowjob to everybody that would vote for her. The required votes to start a political party is 40 000. That's what I call commitment.

Although the Belgian political mess is almost impossible to resolve, the most worrying part it the lump of debt the country has amassed, standing at around € 400 Bn. Additionally, the fact that the country still does not have a budget for 2011 is making credit-rating agencies quite twitchy.

For the people that don’t know anything about this country,

. To add the last nail in the coffin, here are some simple labor/debt statistics about the two main regions of the countries, Flanders and Wallonia.

Wallonian debt per capita by person in employment: +/- €175,000; Unemployment rate: 16.9 %
Flemish debt per capita by person in employment: +/- €40,000; Unemployment rate: 6.83 %

These figures worry me quite a lot and unfortunately I do not have access to credit default swaps or any other nice OTC derivatives to benefit from the almost imminent credit-rating downgrade of this country.

Do you guys share the same feelings towards an imminent downgrade from S&P, Moody’s and Fitch?

Any thought on how to profit from such mess via non-OTC products?

 

Though everything you have said is an accurate portrayal, (asides from omitting Belgium being the beer country) it simply does not matter. For three reasons:

1) Brussels=capital of the EU (de facto). Add in the fact that the country is a monarchy and its relative wealth lies in very few hands. Your result is a figurehead that the EU machinery cannot afford to lose. In other words, if the shit hits the fan you will see a much more rigorous stimulus push than anything the Fed did here.

2) Image is everything. Belgium (like Switzerland) is a place where a lot of secrets and fortunes have gone to die and/or hide over the past hundred fifty years or so. The reputation of being a great little country is not something that shows up on balance sheets, but is definitely something the World Bank, IMF, Paris Club, etc look at.

3) Franco-German backyard. Yeah, this is really just a restatement of #1 but it cannot be ignored. Why was the DC the only American city to exhibit actual growth during the Recession? Look beyond the influx of gov't jobs. It's because in a time of crisis, the power structure needs to send out the all-important all is well citizen message. How do they do that? By shoring up the last lines of defense=HOME. They do this by making sure nothing around their power structure falters. BENELUX doesn't get mentioned enough in America. It is the backyard of Germany and (to a lesser extent) France, the two ideological and fiscal lynch pins of the EU. These two countries (which dominate the so-called union) will see another World War before letting Belgium crumble.

As to your question about products, the question isn't who, what or where...

The question is where will you get a willing counter party and perhaps more importantly how much are you going to have to pay just for that privilege?

 
Best Response

I get your point about the EU institutions not leaving Belgium and it makes sense. If they would, Brussels would be in the deepest shit ever since most of the jobs are somehow linked to either the EU, NATO or embassies. I even herd rumors that these institutions indirectly inject about 1Bn euros per year in Brussels via the jobs they create etc etc...

I am just quite worried about the amount of debt the country is slowly amassing, the lack of political planning and of political leadership. Yes, Germany and France might not let Belgium fail but that would imply bailing them out, therefore trying to trim down a budget that is not yet created ! Our EU friends will never lend the country money if there is no government. And while reputation does matters, it is not immune to declines.

Concerning my question about the non-OTC products, is there a way to short a country/government apart of purchasing CDS's ??

In equities, shorting BEL20 indices seems completely inefficient. Would shorting government bonds make sense ? To me, a downgrade by credit rating agencies should be imminent, therefore raising the price of their debt. Am I completely wrong ?

 

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