In another blow to the belief the European leaders have begun to gain control of the region’s sovereign debt problem, Moody’s downgraded Belgium by two levels to Aa3 and placed its sovereign paper on negative credit watch.

The downgrade is part of a river of similar actions taken by Moody’s, Standard & Poor’s, and Fitch as they continue to evaluate the prospects that austerity budgets can improve deficits in the midst of what appears to have become a deep recession across much of Europe.

Recently, the EU has agreed to increase the size of the fund that will be used to bailout larger economies like Spain and Italy. Many economists believe that the amount is inadequate and that there is not likely to be additional aid from the IMF or ECB.

Credit agencies continue to review the debt of both sovereigns and banks in the region, and more downgrades are to be expected.

Douglas A. McIntyre

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