Were it not for "strong and competent institutions at regional and federal level," S&P said, a downgrade might already have taken place. In the absence of a new government, the current rating has at most six months to run. If a new government is formed, the agency promises to review the rating in two years. Any downgrade could also have an effect on Flanders' own rating, currently, like the federal state, standing at AA+.

Acting prime minister Yves Leterme said that there was nothing new in the report and no reason for concern or panic. "The report confirms that our economic fundamentals are good and that the overall economic situation in the country is also good," he said.

However, the markets reacted differently, pushing the 10-year interest rate on state bonds up nine base points to 4.09%, making it more expensive for Belgium to get credit on the market.

Another victim of the failure to form a new government could be the railways, as S&P threatened to lower the ratings of both Infrabel, the state-owned company that owns the rail infrastructure, and the rail operator NMBS. The telecom operator Belgacom, which is 51% state-owned, faces a similar prospect. Any rating downgrade would affect the ability of the companies involved to raise money on the capital markets for investment.

The Belgian economy is recovering from the global recession, but the upturn is threatened by market turbulence in the euro zone, according to the International Monetary Fund, which last week published its annual report on Belgium.

Economic growth in 2010 was of the order of 2%, slightly above the euro zone average. The growth was largely due to export trade, which led to an improved trade balance and to the build- up of reserves. The employment market, in addition, is growing faster than unemployment. It also acknowledges that the deficit has been brought down from 6% of GDP last year to 4.8% now, while debt has grown less quickly than anticipated.

"Belgium had a strong track record of public debt reduction prior to the global financial crisis, high household savings and a strong external position," reads the report. "Nevertheless, the country has been affected by the recent turbulence on financial markets as evidenced by higher interest rate spreads. Financial market concerns about sovereign risks in the euro area, Belgium's high public debt and political uncertainty could dampen confidence, increase financing costs for the economy and undermine the recovery."

Leterme commented: "The IMF confirms that the economic results of our country are better than the European average. That means we made the right choices in recent years and are moving in the right direction."

Pictured: Leterme: "Moving in the right direction"