Euro Area Sovereign Credit Some Ratings Under Pressure

Euro Area Sovereign Credit: Some Ratings Under Pressure

According to Scope Ratings, governments in the Euro area that are unable to implement consistent medium-term fiscal plans face pressure from credit ratings despite the fact that it is possible to reduce public borrowing, even in highly indebted nations.

Scope Ratings is concerned about countries that are heavily indebted, have large primary deficits, and have governments that struggle to implement reforms in highly fragmented political environments.

Under EU financial assistance programs, important reforms have been implement

France and Belgium, for instance, both have negative Scope outlooks and run the risk of not fully acknowledging their financial constraints. Debt will continue to rise whenever the next crisis occurs because government plans only aim to stabilize public debt at its current elevated ratios.

1. Figure France, Germany, Italy, and Spain have increased expenditure and investment requirements.

The recent upward revision of France’s fiscal deficit to 5.5% of GDP for 2023 further challenges the government’s consolidation plan, which may now require additional savings of approximately EUR 50 billion, or 2% of GDP, in the years ahead of the 2027 presidential elections, according to the Court of Auditors.

Also, without a trace of strategy changes in Belgium following government and local decisions in June, Degree anticipates that Belgium should keep the biggest financial shortage in Europe, surpassing 5% of Gross domestic product throughout the next few years. The third-highest public debt and a steadily rising debt trajectory would result from this.

Download Scope’s full research report.

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