–Adds Comments On Belgian Bonds, Belgium’s Debt and Deficit Ratios

BRUSSELS (MNI) – A Eurobond might be desirable, but political
conditions in Europe today are not ripe for it, European Central Bank
Governing Council member Guy Quaden said Monday.

“As a citizen, I’m not against [E-bonds], but to do that, some
political conditions are to be fulfilled, which is not probably the case
today,” Quaden told reporters at a press conference in Brussels.

What’s needed for now, he said, is more oversight of individual
national governments by the common European authorities. “And the
different national governments have to accept more common discipline.”

With his comment on E-bonds, Quaden stepped into the debate which
was ratcheted up over the weekend when Eurogroup President Jean-Claude
Juncker and Italy’s Finance Minister Giulio Tremonti suggested that the
current crisis could be ended with the rapid creation of a European Debt
Agency, which would issue common Eurozone bonds.

Quaden, who heads the Belgian National Bank, addressed the recent
pressure on Belgian government bonds, saying, “the reaction of bond
markets was very strange.”

He implicitly acknowledged, however, that Belgium — a highly
indebted EMU member — would likely miss its deficit target for 2011.
That target is 4.1% of GDP, and Quaden projected a deficit of 4.7%.

He seemed to blame the recent market jitters about Belgian bonds on
the ongoing failure of Belgium’s politicians to form a new government,
though he also said the market had not acted in a rational manner.

“The reaction of the bond markets last week was very strange, and a
little bit exaggerated and more than a little bit irrational,” Quaden
said. He added: “It would be better to have a new federal government in
the weeks to come in order, particularly, to explain with greater
precision how Belgium is to attain its budgetary objectives.”

He noted that his projection of a 4.7%-of-GDP deficit for 2011 did
not include the possible positive impact of a tax on nuclear power
plants, which is under consideration.

“The objective within the stability programme is 4.1%. This
objective must absolutely be respected,” Quaden said. “The difference,
the amount is 2 billion euros, so we need to find this amount for next
year in order to obtain a deficit of 4.1 percent.”

He said Belgium’s deficit was expected at 4.8% this year.

Quaden also noted that Belgium’s outstanding public debt, which is
expected to rise next year to 99.8% of GDP from 97.6% in 2010, “is still
higher than the European average, but that the gap between the two has
narrowed over the past 10 years – primarily because the European average
has risen. “This is not necessarily good news for the European area but
it puts the issue of debt ratios in Belgium into perspective somewhat,”
Quaden said.

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