Belgium Baloney
Research for Online Investors

by John Dalt

7/27/10

We are all familiar with the problems that the eurozone sovereign debt crisis caused in the spring for world stock markets.  Where will the next problem develop?  By now we know the PIIGS by heart; Portugal, Ireland, Italy, Greece and Spain.  What if the next problem comes from left field, from a completely unexpected development?  If watching government at work is akin to watching sausage making, Brussels is the baloney capital of the world!

I have had two stories cross my computer screen in the last few weeks about Belgium. Belgium is the “capital” of the European Union. Brussels is home to NATO's European headquarters. Brussels is a city of 1.1 million people with a per capita income 230% above the EU average. One-tenth of the Belgium's population lives in Brussels, but the city accounts for one-fifth of the country’s GDP. There are 25,000 people employed by the European Commission, 7,000 by the EU Parliament, and 5,000 by NATO.

There are over 10,000 registered lobbyists, and 1,200 accredited journalists in Brussels with accompanying expense accounts. They pumped an estimated 800 million euros into the Brussels service economy last year. The EU offices put over one billion dollars into the economy in rentals and utilities alone.

This economy has developed to service the ‘needs’ of bureaucrats and politicians.  When the 27 member countries are cutting budgets and raising taxes, where will the budget cuts hit the hardest?  Politically, it would seem easier to cut the foreign expenditures for foreign offices than cut the retirement pay for pensioners!

The foreigners living in Brussels at the behest of their respective governments are some of the highest paid in Europe and sure to see their largess cut back.  As the EU’s largest economy, Germany is Brussels largest benefactor.  They have already suggested the NATO headquarters could be moved to Germany.

Belgium has a 400 billion euro national debt, which represents 114% of GDP.  Belgium runs a 6% annual budget deficit.  The country has been in the top 20% of indebted countries for the last 30 years.  Belgium is the world’s 20th largest economy; Greece was number 28 before their fall from grace.

Watch for cracks in Belgium.  The country was ‘assembled’ in the 1800s by England as a buffer for security from France after Waterloo.  The country is constructed of three distinct zones (Brussels, Flanders and Wallonia) that speak different languages and may chose to dissolve the country and attach to their neighbors rather than face the difficulties of financial hardship.

We don’t know where the next problem will come from that scares investors, but be sure, there will be the next problem. Belgium may be it, but will probably take time to develop as belt tightening in EU countries cuts the cash flow into Brussels.

To the mailbag:  We were at a wedding Saturday and a good friend of ours from Citi/Smith Barney/Morgan Stanley suggested to one of my other friends to buy "Build America Bonds.'  I couldn't help blurt out "No, no, no, don't do that --why loan our crooked govt money at low interest rates that they WILL TAX YOU ON THE GAINS!---paid up subscriber T.M.

Quote of the day-
Life isn't like a box of chocolates. It's more like a jar of jalapenos. What you do today, might burn your butt tomorrow.-Larry the Cable Guy

Editor’s note:  That advice could apply to investing!

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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