MikePadgett.com

Trust (like interest on savings) must be earned

— In these times just how attractive are Belgian government bonds?…”

The Belgian non-government led by Yves Leterme has announced a plan to tackle public debt by the issue of public bonds. Leterme was quoted in Thursday’s Le Soir as saying:

« Vu les difficultés sur les marchés financiers, nous voulons davantage faire appel à la capacité d’épargne des Belges pour financer la dette »

Given the present difficulties on the financial markets, we want to appeal to Belgians’ capacity for saving money.

Government bonds are supposed to be risk-free – this is their principal attraction – and Belgian people are indeed notable savers among Europeans. The government is now offering the incentive of a 4% interest rate for Belgians willing to fill the coffers in support of financing their burgeoning national debt.

There are however a couple of problems with the proposal of Leterme et al.

Firstly, we have embarked on a unique period in Europe, in which the economic landscape will almost certainly look rather different in five years’ time. So while Belgium is not in the same fix as Greece, there is no longer such a thing as a risk-free investment.

Secondly, Belgium is a strongly divided nation which still lacks a government after another recent breakdown in talks (indeed the political crisis itself is thought to have cost €1.8bn so far) and many potential investors may question how their money might be used.