Public Finances Deteriorating in Europe, S&P says
European sovereign nations sporting high credit ratings have started to see weakening public finances amid the ongoing economic crisis.
In a report on the deterioration of public finances among highly rated European nations, Standard and Poor’s Credit Research said eroding tax bases, the need to support banking systems and fiscal stimulus to boost economies have all contributed to significant rises in government debt levels.
In the face of the deterioration in highly rated European sovereigns’ public finances, we expect that substantial levels of wealth and diversification, together with timely policy responses, should allow highly rated European sovereigns to remain rated highly. In some cases, however, their ratings could become lower than prior to the crisis.
Since the beginning of the year, S&P has lowered the long-term ratings on Ireland, Spain, Portugal and Greece, and revised the outlook on the U.K. to negative from stable.
S&P said deficits are expected to rise further and peak for every highly European nations in 2010, when most economies should be returning to growth.
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