Moody's Investors Service said it placed Belgium's Aa1 local and foreign currency government bond ratings on review for possible downgrade. Meanwhile its short-term ratings at Prime-1 are confirmed.

The company pointed out material increase in long-term funding risks for euro area sovereigns with high levels of public debts as reason for the review. The sustained fragility in the wholesale finance environment for euro sovereigns and banks stemming from the sovereign debt crisis. The risks of a deterioration of the public debt trajectory in light of increasing downside risks to economic growth. Moody's noted that Belgium may require additional bank support measure due to the uncertainty of the already pressured balance sheet of the government.

Moody's plans to evaluate the growing risks and the strong credit features such as the economy's net creditor status, high savings rate and the absence of substantial structural imbalances.

The focus of the review will be on the vulnerabilities of the Belgian public debt in the current euro area sovereign and bank funding environment. Moody's said it intends to assess the potential costs and additional contingent liabilities that the government may incur in supporting the Dexia Group.

The growth outlook of the Belgian economy and the government's medium term fiscal and economic plans also may be evaluated. The prospects for political stability in Belgium and the ability to address the institutional weakness of the country's economic and budgetary challenges also will be assessed.

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