17th Mar 2018

Ratings agency downgrades EU on summit day

  • 'It can influence investments in Europe,' the Swedish leader said on S&P's decision (Photo: david.nikonvscanon)

Standard&Poor's, one of the leading US-based ratings agencies, on Friday (20 December) downgraded EU's rating by one notch to AA+, citing concerns over how the bloc's budget was funded.

"In our opinion, the overall creditworthiness of the now 28 European Union member states has declined," Standard&Poor's said in a note to investors.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Last month, it downgraded the Netherlands, one of the few remaining triple-A rated EU countries. In the eurozone, only Germany, Luxembourg and Finland have kept their top rating.

The agency noted that "EU budgetary negotiations have become more contentious, signalling what we consider to be rising risks to the support of the EU from some member states."

EU talks for the 2014-2020 budget took over a year as richer countries - notably the UK and Germany - insisted on a cut, while southern and eastern ones wanted more money.

The European Parliament also held out on a final deal for months, over a disagreement about linking EU structural funds to economic targets.

The news struck just as EU leaders were gathering for their last day of a summit in Brussels.

European Commission chief Jose Manuel Barroso dismissed the rating downgrade.

"We have no deficit, no debt and also very strong budget revenues from our own resources. We disagree with this particular ratings agency," the top official said in a press conference at the end of the EU summit.

"We think the EU is a very credible institution when it comes to its financial obligations," Barroso added.

German Chancellor Angela Merkel said the EU had actually shown "capacity to act" as it managed to get a deal and have a multi-annual budget on 1 January 2014.

EU Council chief Herman Van Rompuy downplayed the S&P decision. "The downgrade will not spoil our Christmas," he said.

But other leaders were more cautious.

Swedish Prime Minister Fredrik Reinfeldt said the downgrade was "something the EU as a whole has to take on board."

"It can influence investments in Europe," he said.

Italian Prime Minister Enrico Letta said the decision should not be ignored, as it showed that Europe has not yet overcome the economic crisis.

The downgrade is unlikely to have an immediate impact, however.

The EU's borrowing capacity amounts €110 billion, backed by the EU budget. It has used it in the Irish and Portuguese bailouts, as well as in assistance to non-eurozone countries such as Latvia and Romania.

Carsten Brzeski, chief economist with ING Bank, has calculated that the EU has only €55 billion of outstanding debt to repay - less than 0.5 percent of EU's gross domestic product.

"The EU's borrowing costs are 30 basis points above Germany, so very low. Unless it needs to borrow more money for Hungary or Romania, the credit rating downgrade will have no impact at all," Brzeski told this website.

The ratings agency may however further downgrade the eurozone bailout fund (ESM), after it stripped it of its top rating in January.

UK downgrade rounds off EU's Black Friday

Rating agency Moody's stripped the UK of its coveted AAA credit rating on Friday (22 February), rounding off a day of economic gloom in the EU.

Merkel in Paris for eurozone reform talks

Angela Merkel - who started her fourth term as Germany's chancellor earlier this week - is wasting no time on big issues like eurozone reforms. On Friday she is meeting Emmanuel Macron where the two will seek common ground.

EU insists on US tariffs exemption

Europe is "an ally, not a threat", the EU Commission says - as the US is poised to impose duties in steel and aluminium. Common action on Chinese steel overcapacity could help diffuse the crisis.

Trump starts countdown to EU trade war

EU sales of steel to US to face 25 percent tariff from 23 March, with Europe to hit back on motorbikes and bourbon in looming trade war.

VW dismisses complaints on Dieselgate fix

'I think customers who want to get information (...) are able to receive information if they want," VW management board member Hiltrud Werner told EUobserver. Consumer groups disagree.

News in Brief

  1. Sweden emerges as possible US-North Korean summit host
  2. Google accused of paying academics backing its policies
  3. New interior minister: 'Islam doesn't belong to Germany'
  4. Hamburg 'dieselgate' driver wins case to get new VW car
  5. Slovak deputy PM asked to form new government
  6. US, Germany, France condemn 'assault on UK sovereignty'
  7. MEPs accept Amsterdam as seat for EU medicines agency
  8. Auditors: EU farm 'simplification' made subsidies more complex

Stakeholders' Highlights

  1. Counter BalanceConmtroversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  2. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  3. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  4. Martens CentreEuropean Defence Union: Time to Aim High?
  5. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  6. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  7. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  8. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  9. EPSUWill the Circular Economy be an Economy With no Workers?
  10. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  11. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  12. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework

Latest News

  1. Brexit and trade will top This WEEK
  2. Dutch MPs in plan to shut EU website on Russian propaganda
  3. Four years on – but we will not forget illegally-occupied Crimea
  4. Evacuated women from Libya arrive newly-pregnant
  5. Merkel in Paris for eurozone reform talks
  6. Commission rejects ombudsman criticism over Barroso case
  7. Western allies back UK amid Russian media blitz
  8. Meet the European Parliament's twittersphere