Markets mistrustful of Belgium

"Speculators force Leterme to make cuts," headlines De Morgen in the wake of a "disastrous" day for Belgium on the sovereign bond market, highlighting the increasing mistrust of international investors. On 10 January, interest on Belgian ten-year bills rose to an 18-month high of 4.27%. Worse still, the Flemish daily notes, the spread between the rate on Belgian bonds and the benchmark German bund has risen to a record level since the introduction of the euro. King Albert II has asked caretaker Prime Minister Yves Leterme to move forward as quickly as possible with the presentation of the 2011 budget (as the government only has a mandate to manage ongoing spending, up until now, the 2010 budget has been re-implemented on a month by month basis). Leterme has announced measures for 4 billion euros of savings, which will be given "their first serious test" by the markets on the occasion of the next bond auction at the end of January."