Belgium is burdened with mounting problems and a collapsing
government is exacerbating the situation. If a government isn't
established soon, the exchange traded fund (
ETF
) could sink with the country's economy.
Belgian Prime Minister Yves Leterme tendered his government's
resignation to King Albert after the Flemish liberal party pulled
out of its five-month old coalition, but the monarch has yet to
decide upon accepting control,
according to
The New York Times
. The palace has stated that "in the current circumstances, a
political crisis would be inopportune and would seriously damage
both the economic and social well-being of the citizens and the
role of Belgium in Europe."
- Belgium is coming off its worst post-war recession, with the
Central Bank estimating growth to be only 1% for the year,
reports Ben Deighton for Reuters
. [
Belgium ETF: What's Good, What Isn't.
]
- The rising unemployment rate is also an issue, and the
government may have to step in to mitigate the situation.
- Economist Steven Vanneste at BNP Paribas Fortis believes the
government needs to start fixing the pension issue that require
some policy changes.
- Economists believe that political strife in the
linguistically-divided country as it recovers would impede the
government's prospects of reducing the budget deficit. The
Belgian budget deficit is calculated to be 4.8% of GDP this year,
increasing the national debt above 100% of GDP. According to ING
economist Philippe Ledent, the sovereign bond spreads could
increase by as much as 0.40%.
- Negotiations between employers and unions could be undermined
since the government would have acted as a mediator. Social
instability could result and hamper growth.
- Belgium would have also taken the role of EU presidency,
which allows member states to conduct policy, but the role would
be undermined if Belgium has no government or a caretaker
government.
If you're holding Belgium, watch that trend line. The ETF is
still 2.8% above the 200-day moving average; if it breaks that, it
will be a sell signal. [
How to Follow Trends.
]
For more information on Belgium, visit our
Belgium category
.
-
iShares MSCI Belgium (NYSEArca:
EWK
)
Max Chen contributed to this article.