BRUSSELS BILAT BREW: December 12, 2007

Identifier: 
07BRUSSELS3487

UNCLAS BRUSSELS 003487

SIPDIS

SIPDIS

STATE FOR EB/OIA, EB/TPP/IPE AND EUR/UE
TREASURY FOR OASIA/ICN - ATUKORALA
USDOC FOR 4212/OECA/JLEVINE

E.O. 12958: N/A
TAGS: ECON, EFIN, EINT, EINV, SENV, BE, CH
SUBJECT: BRUSSELS BILAT BREW: December 12, 2007

(U) Summary: The Brussels Bilat Brew gives an overview of the most
recent Belgian economic issues. The latest: Belgium has two 'Smart
Cities'; Chinese insurance firm invests heavily in Fortis; the
rising cost of government bonds; Wallonia's economy may be catching
up; and company numbers for each region. End Summary.

------------------------
Belgium's 'Smart Cities'
------------------------

1. (U) A study published in October by the Vienna University of
Technology ranked Ghent (16) and Brugge (20) as two among the top 20
of European 'Smart Cities'. The survey ranked medium-sized
(100,000-500,000 inhabitants) cities in Europe, using a system that
evaluated the economy, people, governance, mobility, and environment
and living circumstances, all of which were based on certain 'smart'
characteristics. For example, the characteristics considered for a
'smart economy' were the levels of innovative spirit,
entrepreneurship, economic image and trademarks, productivity,
flexibility of labor markets and international recognition. Both
cities received their highest ratings in the categories of smart
living and smart mobility, identifying the high quality of life and
accessibility in Belgium as a whole. Overall, the study has the
potential to serve as a useful and comprehensive resource for
individuals and businesses for investment and relocation purposes in
Europe. More information can be found at www.smart-cities.eu.

----------------------------
Chinese Investment in FORTIS
----------------------------

2. (U) The Chinese Insurance Firm, Ping An Insurance (Group), has
announced a $2.7 billion investment in the Dutch-Belgian bank Fortis
NV. Fortis was a member of the three bank consortium which
successfully took over the Dutch Bank ABN-AMRO, the largest bank
take-over in history. The Ping An investment will give the Chinese
firm a 4.2% stake in Fortis. Press reports state that the
investment is part of Ping An's strategy to expand its insurance
business in its home market in China. It intends to tap Fortis'
expertise in selling insurance through its bank branches. For
Fortis' part, the Ping An investment helps Fortis recover from its
financial exertions in the long, hard-fought ABN-AMRO takeover.
Markets agreed, at least initially, driving up the value of Fortis
shares by 2% the day the deal was announced.

------------------------------------------
Government Crisis Raising Borrowing Costs?
------------------------------------------

3. (U) Luc Coene, currently vice-governor of the National Bank of
Belgium, claims that Belgium is paying an economic price for its
prolonged political crisis. Coene - in another life chief of staff
to PM Verhofstadt - points out that Belgian government bonds are
currently priced 25 basic points above similar German bonds (known
as bunds), and that this higher interest rate of 6.25 percent costs
the Belgian treasury at least 10 million euros per year. However,
an inquiry by the Belgian financial press revealed that there is
always a higher spread of at least 10 basic points on GOB bonds
compared to the German bonds, and that London banks are now even
pointing out this difference to prospective buyers, urging them to
buy the Belgian bonds, considering the fact that the GOB 'will never
go bankrupt'. Additionally, the rating agency Fitch maintains its
AA plus rating for the Kingdom of Belgium, adding it sees no reason
why Belgium all of a sudden would be unable to repay its outstanding
debt.

-------------------------
Is Wallonia Catching Up?
-------------------------

4. (U) Since 2000, Wallonia's economy has grown on average 1.8
percent per year. This is slightly higher than that of wealthier
Flanders, whose economy grew on average 1.7 percent per year over
the same period. Analysts do not attribute Wallonia's growth to the
"Marshall Plan" for the region introduced in 2005. Wallonia still
lags behind Flanders in overall regional GDP and employment.
Average unemployment in Wallonia is cited at 12 percent, compared to
an average of six percent in Flanders. (COMMENT: Wallonian growth,
however, begins from a lower base. END COMMENT.)
--------------------------------------
Regional statistics on Company Numbers
--------------------------------------

5. (U) According to Marc Verwilghen, Federal Minister of Economics
in the Belgian Parliament, Flanders is the location of 512,580
companies (58% of the total number of companies in Belgium),
compared to the Brussels region which has 120,198 (14%) and
Wallonia, where there are 240,952 companies (28%). The number of
companies that have subsidiaries in more than one region amounts to
9,339 (11%).

FOX