Standard & Poor’s has downgraded Belgium’s long-term sovereign credit rating from AA-plus to AA over concerns about the country’s debt load, inability to form a new government, and difficulties in the country’s financial sector. Belgium is a member of Eurozone and, as such, is tied to the Euro and its 16 other users.

In making its decision, Standard and Poor’s concluded:

We think the Belgian government’s capacity to prevent an increase in general government debt, which we consider to be already at high levels, is being constrained by rapid private sector deleveraging both in Belgium and among many of Belgium’s key trading partners.

In our opinion, protracted political uncertainty remains a risk to its creditworthiness, in particular given i) the likely slowdown in economic growth we anticipate for 2012, ii) increasingly difficult financial market conditions affecting most of the eurozone governments and iii) a high level of government debt and its rollover ratio and contingent liabilities related to the financial sector.

Helped by what we consider to be relatively robust economic growth of around 2%, we expect Belgium’s budget deficit in 2011 likely to be around 3.6% of GDP, which is its 2011 budgetary target. However, we believe that the beneficial effect of favorable budgetary performance on the debt trajectory has been more than offset by the additional cost of the sale of Dexia Bank Belgium to the Belgian state in October this year. The related cost increased Belgium’s debt by 1.1% of GDP, and increased contingent liabilities via the ceiling of related sovereign guarantees to Dexia SA and Dexia Credit Local by about €54 billion. This raises the future amount of outstanding sovereign guarantees to the financial sector to around €90 billion or around 24.5% of GDP at the end of 2011.

€90 billion converts to about $119 billion — a significant chunk of change for any country, more so for one lacking a government and with a gross domestic product (GDP) of about $467 billion.

Welcome to the beginning of the end of the eurozone as we know it.