Moody's: Europe Won't Return to pre-Cisis Levels Anytime Soon (FXE)
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Stabilising credit trends, progress on structural reforms to support growth prospects, and significantly reduced region-wide pressures generate scope for selective positive sovereign rating actions in the euro area, says Moody's Investors Service in a new report published today. However, elevated debt levels, subdued economic growth, slow institutional reform progress and susceptibility to downside risks continue to challenge creditworthiness, constraining upward rating migration in the periphery, and preventing a return to pre-crisis rating levels in the foreseeable future.
The new report, entitled "Sovereign Outlook: Euro Area -- Stabilising credit trends; no return to pre-crisis rating levels in sight", is now available on www.moodys.com. This report is part of Moody's regular series of annual regional sovereign outlooks, and expresses the rating agency's expectations for fundamental sovereign credit conditions in the euro area over the next 12-18 months. To coincide with the publication of this report, Moody's has launched a topic page on its web site entitled Euro Area -- The Road to Sustainable Growth, which will act as a constantly updated cross-sector repository of Moody's latest views and research on this theme. Moody's subscribers can access this report and new topic page via the links provided at the end of this press release.
Moody's notes that improvements in fiscal balances, while slow, have been material and mainly structural in nature, alleviating a key constraint in the rating agency's assessment of government financial strength.
The improvement in credit conditions is reflected in 13 of the 18 euro area sovereign ratings that now carry stable outlooks, and point to Moody's expectation of stable credit conditions -- i.e., a two in three chance of no rating change -- over the next 12 to 18 months. Moreover, as downside credit pressures continue to ease, Moody's expects continued progress on structural reforms to support an improving macroeconomic environment and generate some scope for selected positive rating actions, exemplified by three ratings with positive outlooks.
However, the legacy of impaired government balance sheets, high private-sector debt levels and only slow economic recoveries leaves many euro area sovereigns susceptible to downside risks. Slow progress in enhancing euro area-level institutional capacity to prevent the re-emergence of imbalances and improve resistance to future crises will limit a return to pre-crisis rating levels over the foreseeable future. The credit quality of some euro area sovereigns remains under pressure, and upward rating migration in the periphery is likely to occur only slowly and selectively.
Subscribers can access this report via this link: https://www.moodys.com/research/Sovereign-Outlook-Euro-Area-Stabilising-credit-trends-no-return-to--PBC_166007
The new report, entitled "Sovereign Outlook: Euro Area -- Stabilising credit trends; no return to pre-crisis rating levels in sight", is now available on www.moodys.com. This report is part of Moody's regular series of annual regional sovereign outlooks, and expresses the rating agency's expectations for fundamental sovereign credit conditions in the euro area over the next 12-18 months. To coincide with the publication of this report, Moody's has launched a topic page on its web site entitled Euro Area -- The Road to Sustainable Growth, which will act as a constantly updated cross-sector repository of Moody's latest views and research on this theme. Moody's subscribers can access this report and new topic page via the links provided at the end of this press release.
Moody's notes that improvements in fiscal balances, while slow, have been material and mainly structural in nature, alleviating a key constraint in the rating agency's assessment of government financial strength.
The improvement in credit conditions is reflected in 13 of the 18 euro area sovereign ratings that now carry stable outlooks, and point to Moody's expectation of stable credit conditions -- i.e., a two in three chance of no rating change -- over the next 12 to 18 months. Moreover, as downside credit pressures continue to ease, Moody's expects continued progress on structural reforms to support an improving macroeconomic environment and generate some scope for selected positive rating actions, exemplified by three ratings with positive outlooks.
However, the legacy of impaired government balance sheets, high private-sector debt levels and only slow economic recoveries leaves many euro area sovereigns susceptible to downside risks. Slow progress in enhancing euro area-level institutional capacity to prevent the re-emergence of imbalances and improve resistance to future crises will limit a return to pre-crisis rating levels over the foreseeable future. The credit quality of some euro area sovereigns remains under pressure, and upward rating migration in the periphery is likely to occur only slowly and selectively.
Subscribers can access this report via this link: https://www.moodys.com/research/Sovereign-Outlook-Euro-Area-Stabilising-credit-trends-no-return-to--PBC_166007
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