The foundations of the current economic turmoil were laid shortly after the tragic events of 11 September 2001 in the United States. After the terrorist attacks and the bursting of the Internet bubble in the same period, the authorities feared a recession. To counter these fears, the Federal Reserve (Fed) gradually lowered interest rates to a historic low level of 1% in 2003. It took until June 2004 before the Fed moved to gradually increase or bring interest rates back to normal. So for a number of years, it was really cheap to borrow money on the American (money) market. This monetary policy led to a surplus of money that needed to be invested in profitable projects like the American housing market which had been experiencing a revival since the late 1990s. The recovery of the housing market fuelled speculation: houses were bought so that they could be re-sold later at vastly increased prices. Loans could also be taken out for other (consumer) goods (car, washing machine, etc.) secured against the mortgage on the house.

During the same period, the American banks developed a range of mortgage loans, often with attractive initial terms: during the first two or three years, an interest rate discount was granted which was compensated afterwards by charging an interest rate surcharge. The interest rate rise was referred to as the "step-up" and the time when this higher rate was introduced was called the "reset".

These two developments, in combination with the way the banks were being run seem to have formed a dangerous cocktail, which resulted in the crisis in the interbank market. The banks' operations were originally based on the “originate and hold” model : the bank managed the risks in its own portfolio, which meant that it was responsible for these risks itself. This model made way in the United States for the "originate and distribute” model. This boiled down to loans being re-packaged (= securitisation) and sold on through the financial markets, which meant that the risks were passed on to third parties. It is hardly surprising that this shift contributed to opportunistic behaviour on the part of some banks. In this context, mortgage loans were made to people with lower creditworthiness, so-called "subprime mortgages" or junk mortgages.

In 2006, the first subprime mortgages reached the moment when their interest rate discount was converted into an interest rate surcharge. The first repayment problems cropped up and forced sales of houses began to happen. This had a negative effect on house prices, which meant that more borrowers ran into difficulties. The securitised (= repackaged) loans which had since been distributed all over the world, in the form of various financial products, appear to have had an excessively high rating which now needed to be downgraded. Suddenly, write-downs of the value of these products needed to be made, and there was a threat of a liquidity shortage on the interbank market. The solvency of a number of banks was in jeopardy.

The table below gives an estimate on an annual basis of economic growth and inflation in the euro zone and in Belgium. The growth figures show slowing growth in 2009, both in Belgium and the euro zone. Economic growth is forecast at 1.3% and 0.9% respectively, which is the lowest level since 2001. Inflation should fall, but at present, remains higher than the 2% forecast by the ECB. These figures do not take account of the financial crisis that flared up a couple of weeks ago. In the World Economic Outlook (IMF), in which the forecast for economic growth in 2009 does take account of the financial crisis, the outlook for Belgium is gloomy, at 0.2%.

The table above shows that quarterly growth is falling too, although at present, there is no question of negative growth yet. There is nothing to rule out zero growth or even negative growth for the third quarter. When growth has been negative for two successive quarters, this is referred to as a recession. It is forecast that this will manifest itself in the near future.

The macro-economic data appears to be confirmed when we look at companies. According to Graydon, the number of bankruptcies last month reached an absolute record. In September, a total of 927 companies were declared bankrupt, or 18% more than in the previous year. Never before have so many bankruptcies been declared in one month in Belgium.