Note concerning rating 2018
The Flemish Community has an Aa2 rating, while Belgium has a lower rating, specifically Aa3. This is an exceptional situation. According to Moody’s, Flanders owes its rating thanks to a strong track record of budgetary discipline and continued commitment to fiscal consolidation, modest debt burden and ample access to liquidity and a strong and diversified economic base.
There are two conditions that must be met for a regional or local government (RLG) to be rated above the sovereign: market insulation and fiscal autonomy. Moody’s expressed some concern about meeting the first condition, market insulation, since Flanders has chosen to make more direct use of the capital markets. However, a direct financing of certain public institutions is cheaper and generates budgetary gains. Moreover, Flanders has a positive net asset position. Flanders also fulfils the second condition, fiscal autonomy, since the Sixth State Reform provided for a large increase in Flemish tax autonomy. Furthermore, changes to the special financing law requires a two-thirds majority in parliament with a majority in each language group. When comparing the four different regions in Europe which are rated above their sovereign, Flanders has established a good position among them.