Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the European Union and Euratom (long-term issuer and senior unsecured foreign-currency debt ratings: AAA/Stable; short-term issuer foreign-currency ratings: S-1+/Stable) on 7 April 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

The AAA rating of the European Union (EU) reflects the supranational’s ‘very strong’ Member support and ‘excellent’ intrinsic strength.

The rating benefits from the EU’s largest Member States having a high weighted average rating of AA-, the supranational’s track record and solid legal basis for receiving timely financial support, and the extraordinary support mechanisms ensuring de facto joint and several support from EU Member States. The EU’s legally enshrined debt service priority combined with its meaningful budgetary flexibility to delay significant amounts of annual expenditure provides further investor assurance.

The EU’s institutional profile is characterised by its record of excellent governance and its irreplaceable mandate for its Member States. It played a key role in Europe’s response to Covid-19 and the energy crisis via the SURE and NGEU programmes and is supporting European rearmament efforts while coordinating Member States’ response to the sharp increase in tariffs implemented by the US. The EU is also leading the continent’s transition towards a carbon-neutral and climate-resilient economy. The target of issuing around 30% of NGEU bonds, or up to EUR 214bn, as green bonds is likely to transform the EU into the largest green bond issuer worldwide.

The assessment of the EU’s financial profile is supported by a very strong liquidity and funding profile including high, prudently managed liquid assets, excellent market access given its global benchmark issuer status, and a diversified funding base. The EU’s high asset quality reflects its direct lending mostly to EU sovereigns, combined with its preferred creditor status and the resulting track record of zero non-performing loans.

Challenges, which are marginal at the AAA level, relate to a significant increase in outstanding debt since the Covid-19 pandemic and energy crises to EUR 623bn as of March 2025, up from around EUR 52bn in 2019. Scope expects the EU’s outstanding debt to increase further over coming years given NGEU disbursements, rising defence expenditure, and continued support for Ukraine and its eventual reconstruction. This will result in higher debt repayments going forward, and a steady increase in outstanding guarantees, mostly to the European Investment Bank (AAA/Stable).

As of 31 March 2025, EUR 623bn in EU bonds were outstanding, with most of the proceeds allocated to NGEU (66%). The total financial envelope of the RRF at mid-October 2024 stood at EUR 650 billion across the 27 EU Member States. This breaks down in EUR 359 billion in grants and EUR 291 billion in loans. With the amended RRF Regulation, additional grants under the Emissions Trading System (ETS) and Brexit Adjustment Reserve (BAR) have been made available to Member States. To date, around EUR 308bn of loans and grants under the RRF (including pre-financing payments) have been disbursed to Member States. Regular disbursements are expected to continue in the coming months following the positive assessment of payment requests submitted by Member States.

Since January 2023 the EU has adopted a new funding strategy (the EU unified funding approach) to issue single-branded EU Bonds, rather than issuing them under separate programmes. Proceeds are collected in a central funding pool and subsequently allocated to the various funding programmes. This contributes to making EU Bonds more liquid and supports a more homogeneous secondary market by avoiding fragmentation in issuances. The European Commission has continued to develop the market for EU Bonds, including the introduction of quoting arrangements in November 2023 and the launch of a repo facility in October 2024. This is helping to deepen market liquidity and supported total annual turnover of EU Bonds to exceed EUR 1trn in 2024.

The EU also continues to demonstrate its role in providing funding to its Member States beyond the NGEU programme. In response to rapidly changing geopolitical pressures, the European Commission has proposed the Security Action For Europe (SAFE) initiative to enhance the EU's defence capabilities through joint procurement. Under this proposal, the EU plans to borrow up to EUR 150bn, backed by the EU budget, to provide loans to Member States for defence investments. These loans would have a maturity of up to 45 years, allowing countries to spread the financial burden over several decades. Member States can apply for this loan programme until the end of 2030. The funds are intended for priority defence projects, including air and missile defence systems, drones, cyber capabilities, and military mobility. To be eligible, orders must involve at least two participating countries, one of which must be an EU Member State. Additionally, at least 65% of the total cost of the equipment purchased with these loans must originate from the EU, European Economic Area (EEA), European Free Trade Association (EFTA), or Ukraine.

In addition, as US support for Ukraine weakens, Scope also expects the EU to further increase its financial support for Ukraine. As a result, Scope expects EU bond issuance to remain elevated, even after the completion of the NGEU programme in 2026. Overall, these programmes will thus lead to higher debt outstanding backed by the EU budget in coming years. Thus, unless reformed, a significantly greater share of the EU budget will be spent on interest and repayments going forward, especially starting over the next multiannual financial framework 2028-35.

The Stable Outlook reflects Scope’s view that the risks the EU faces over the next 12 to 18 months are balanced.

Downside scenarios for the long-term ratings and Outlooks are (individually or collectively):

1. the highly rated key Member States were downgraded;
    
2. ithe EU’s institutional setup weakened; and/or
    
3. the EU’s liquidity buffers declined.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Supranational Rating Methodology, 21 June 2024) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Eiko Sievert, Senior Director

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