EU Sovereign Credit Risk Index: Some Divergences, But Improving Trend

The EU Sovereign Credit Risk Index covers all 28 EU member states, including the UK.

Greece has made major steps towards reform (see Greece news article) but remains the highest risk EU Sovereign, by a considerable margin.

Compared with mid-2016, the latest data shows modest improvements in 11 countries – Ireland, Spain, Portugal , Lithuania, Austria, Slovakia, Slovenia, Hungary, Romania, Bulgaria and Greece. There has been deterioration in Italy, Croatia and Latvia.

The Brexit vote has fuelled concerns about the political and economic outlook for the other EU economies. The EU nations clearly have a number of pressing issues, but so far these are being tackled or managed: Italy appears to have stabilised its most vulnerable banks and the Cyprus peace negotiations (see Cyrpus news article) still look promising. The Brexit vote seems to have galvanised the other EU nations into closer co-operation – some of the traditionally more difficult countries are becoming less obstructive.

Challenges remain: the ongoing refugee crisis, unrest in Romania, and the prospect of renewed funding problems for Greece. Europe also has restless neighbours, with renewed fighting in Ukraine, and post-coup aftershocks in Turkey.

Following the Brexit and Trump surprise wins in 2016, growing populism and anti-EU sentiment in continental Europe have focused media attention on the prospect of a Le Pen victory in the September election in France. But Le Pen faces significant logistical obstacles due to the structure of the French electoral system; and pro-EU groups in France see Brexit as an opportunity to strengthen the position of France within the EU.

Despite Europe’s challenges, banks are taking a cautiously optimistic view of Sovereign credit risk in the EU.


Disclaimer: Credit Benchmark does not solicit any action based upon this report, which is not to be construed as an invitation to buy or sell any security or financial instrument. This report is not intended to provide personal investment advice and it does not take into account the investment objectives, financial situation and the particular needs of a particular person who may read this report.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.