The impact of the financial crisis on the Belgian public debt and the heavy burden of public guarantees

Eric Dor (e.dor@ieseg.fr)

No 2012-ECO-05, Working Papers from IESEG School of Management

Abstract: Since 2008, in order to bail out several financial institutions, the Belgian federal and regional governments have been constrained to substantially increase their indebtedness level. They also had to provide guarantees covering liabilities of these financial institutions. If the payment of these guarantees was required, it would imply a further enormous increase of government debt. This article presents a list of the different State loans or taking of equity stakes, which have already increased the gross public debt, and of the grants of guarantees which could potentially raise this debt to such a high level that it would threaten the solvency of the State. The article also points out the absence of credibility of the deposits guarantee schemes in an institutional environment which prohibits the central bank to directly finance the State.

Pages: 9 pages
Date: 2012-03
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