Improved EU Credit Rating by Good Finance’s
October 19, 2019
Good Finance’s Investors Service improved the outlook for the downgrade of the European Union debt rating so far, mainly by improving the creditworthiness of the largest EU economies and easing the risks stemming from the eurozone debt crisis.
The world’s largest credit rating group
Also announced its confirmation of the EU’s best possible “Aaa” rating after closing European and US markets in London on Saturday morning.
With the prospect of improvement, the company has taken the elite rating off the EU agenda.
The dramatic improvement in the debt profile of large EU economies is indicated by the fact that 80.5 percent of the payments to the EU budget currently come from member states with sovereign debt ratings that Good Finance’s maintains a stable or probability-positive outlook, the company says. When the EU rating was negative in September 2012, the rating was only 22 percent.
The CRA recalled that it has recently improved its debt outlook for Germany (Aaa / stable), the Netherlands (Aaa / stable), Belgium (Aa3 / stable), Italy (Baa2 / stable) and Spain (Baa2 / positive).
However, recent credit rating steps on peripheral euro economies
mainly Ireland (Baa3 / positive) and Portugal (Ba3 / stable), indicate a decreasing risk of these countries defaulting on their debt to the EU, according to Good Finance’s analysis.
Good Finance’s has recently been improving the rating and rating outlook for central and peripheral Euro economies.
A week ago, the Netherlands and Belgium changed their Aaa and Aa3 ratings, while Germany and Austria changed their Aaa outlook from negative to stable two weeks ago.
Three weeks ago, it raised the Spanish government bond rating from “Baa3” to “Baa2” by one grade, and gave a positive outlook indicating the possibility of further upgrading.
Good Finance’s has thus withdrawn from the agenda the withdrawal of investment-grade sovereign debt ratings in Spain. In the company’s methodology, “Baa3” is the lower end of the recommended investment grade, from which the Spanish debtors’ ratings are one step up after Good Finance’s decision.
Good Finance’s improved its outlook from its negative to long-term
“Baa2 / Prime-2” ratings for Italian government bonds, justifying the move by stabilizing the Italian government debt dynamics.
In justifying these steps, Good Finance’s has repeatedly emphasized its view that the improvement of the institutional framework of the euro area has mitigated the risk of epidemics within the currency union. Among these improvements, the company included the Euro Bank’s (ECB) unlimited aftermarket bond purchase program (OMT), the establishment of the Euro Area Stability Mechanism (ESM), and progress in the process of establishing the Euro Banking Union. All these changes reduce, according to the credit rating agency, the risk that new financial support packages will become necessary, or, if needed, may be lower than previously, given the improvements in the public finance sectors