The Belgian government urged citizens today to finance the country's debt by subscribing to a government bond as a record-breaking political crisis continues and Belgium's borrowing costs spike.
After a day that saw Belgian borrowing costs soar to 5.423% on 10-year bonds, caretaker premier Yves Leterme issued a rare appeal in the press and on radio, saying: "Given the difficulties on the financial markets, we want to increasingly appeal to Belgian savings to finance the debt".
To increase its appeal, the bond being launched today offers three, five and eight-year paper at 3.5%, 4% and 4.5%, one point above a previous offer.
The plea comes as Belgium stands in the firing line of markets due to its record-breaking political crisis which took a turn for the worse this week when talks among six parties that agreed to form a coalition broke down over a future budget.
With debt at almost 100% of GDP the founding-member of the European Union risks being sucked into the euro crisis. The European Commission yesterday repeated a warning to Belgium to bring its public deficit below 3% of GDP by 2012 - rather than the 4.6% forecast failing action - or face a fine running to over €0.5 billion.
Meanwhile the country was left awaiting a decision by Socialist leader Elio Di Rupo on whether or not he will continue to lead efforts to form a coalition after 529 days without a government, a world record. Di Rupo handed in his resignation early this week after four-month-long talks broke down over the terms of a budget. Albert II yesterday asked him to reconsider.
The parties involved are widely divided over how to trim €11.3 billion off the deficit next year and some €20 billion in all by 2015. Centre-right parties want Di Rupo to pledge more cuts off social welfare benefits and state spending rather than raising taxes.
