Standard & Poor’s Sovereign Ratings Anchored Expectations In The Depths Of Eurozone Crisis

Government bond markets in the eurozone have rallied since the depths of the sovereign debt crisis in 2011 and 2012. Yields have declined ever since European Central Bank President Mario Draghi said the bank will do “whatever it takes to preserve the euro” on July 26, 2012. Since early this year, sovereign issuers on the so-called periphery have been able to borrow at or close to all-time lows. In this article we define the countries on the periphery as ItalySpain,PortugalIrelandGreece, and Slovenia. Even Greece, which defaulted twice in recent years, has been able to tap the capital markets again to a limited extent, a far cry from 2010 to 2012, when it and other sovereigns in the European Economic and Monetary Union (EMU or eurozone) had lost access.

Although market sentiment has improved, Standard & Poor’s Ratings Services’ ratings on eurozone sovereigns haven’t risen commensurately. Indeed, since the market recovery, we have raised the ratings by one notch only on Spain andLatvia in May 2014, and then on Ireland in June (other than Greece and Cyprus following their respective emergence from default). Overall, the sovereign ratings remain well below pre-crisis levels. We currently have only one positive outlook (on the ‘A-‘ rating on Ireland) and two negative ones (on the ‘BBB’ rating on Italy and the ‘AAA’ rating on Finland). The remaining 15 outlooks on the sovereigns are stable. These outlooks together indicate that we don’t anticipate many rating actions on eurozone sovereigns within the next year or two. Our ratings, therefore, reflect a cautious view about the credit outlook, which in turn is based on our view that growth will remain subdued because deleveraging across much of the region will continue for several years (see “The Long Haul: Eurozone Deleveraging Could Stunt Growth For Years,” published on June 10, 2014, on RatingsDirect).



The Association of International Wealth Management of India (AIWMI) is a not-for-profit organization and a globally recognized membership association for finance professionals. AIWMI primarily focuses on the broad and strategic role of developing a more robust and forward-looking training infrastructure for the financial services sector and to promote more active industry involvement and collaboration in training and continuing education. AIWMI is offering advanced international certification programs along with a wide variety of high-quality executive education programs. AIWMI programs combine state-of-the-art knowledge and skills with practical experience and insights into the functioning of the financial sector. All AIWMI courses and educational events have an intense and pragmatic curriculum. Participants are exposed to the latest developments within the financial services sector. AIWMI plays a key role in guiding the development of the financial services sector. AIWMI works with key industry participants’ viz. the Government, the Regulators, the Industries/Associations, the Corporate, the Media and the General Public to achieve its objectives. Besides enhancing technical competence and professionalism in the industry, AIWMI organizes events and facilitates discussions to promote best practices in leadership and talent development in the financial sector with an aim to become Asia’s premier center of excellence for financial education.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s