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      Scope takes no action on the European Union and Euratom
      FRIDAY, 16/04/2021 - Scope Ratings GmbH
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      Scope takes no action on the European Union and Euratom

      Monitoring review announcement

      Scope Ratings reviews its ratings either yearly, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remains proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for the European Union and Euratom (AAA/Stable; S-1+/Stable) on 14 April 2021. This monitoring note does not constitute a rating action nor indicates the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

      Key rating factors

      The AAA ratings for the European Union (EU) and the European Atomic Energy Community (Euratom) reflect the supranationals’ highly rated key shareholders, very strong institutional setup ensuring de facto joint and several support, legally enshrined debt service priority combined with significant budgetary flexibility, and conservative cash management resulting in high liquidity buffers. The EU’s response to the Covid-19 shock will increase its outstanding liabilities almost twentyfold over the coming years. Funding for the SURE programme is expected to be mostly concluded by the end of Q2 this year while funding for NGEU is set to start during the second half of 2021. These programmes will make the EU the world’s largest supranational issuer, resulting in higher debt repayments going forward. The EU is also exposed to the risk that its guarantees covering the external and riskier activities of the European Investment Bank (EIB), the European Fund for Sustainable Development (EFSD), and, going forward, the InvestEU programme will be drawn upon. Finally, following Brexit and negotiations on rebates, EU budget contributions based on the gross national income (GNI) of member states are now concentrated on fewer highly rated shareholders. The Stable Outlook reflects our assessment of the EU’s high buffers to withstand shocks.

      The methodology applicable for the reviewed ratings and rating Outlooks (Supranational Entities, 11 November 2020) is available on https://www.scoperatings.com/#!methodology/list.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Alvise Lennkh, Executive Director

      © 2021 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. 

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