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Rating firms buy into euro zone recovery story

Paris, April 26, 2014

Ratings agencies gave a broadly upbeat assessment of the euro zone's creditworthiness yesterday, contrasting sharply with reviews of recent years and reflecting growing confidence in the region's fiscal and economic recovery.

On a day of credit updates scheduled for three of the bloc's top four economies, Standard & Poor's affirmed its ratings on France, while Fitch raised its outlook on Italy and was expected to boost its view of Spain after Europe's markets close, according to a report in the Gulf Daily News, our sister publication.

Borrowing costs for the countries worst hit by the crisis have fallen sharply this year as the European Central Bank's loose monetary policy encourages investors hunting for returns to bet on their recovering economies.

Italy's benchmark 10-year bond yielded 3.12 per cent on the secondary market yesterday, not far from a record low of 3.07pc hit last week.

Fitch's outlook upgrade on Italy to stable, with the sovereign rating affirmed three notches above junk at BBB+, follows a rise earlier this month of its outlook on bailed-out Portugal to positive from negative.

Italy was a fulcrum of the debt crisis a couple of years ago together with Spain, whose sovereign rating many investors and analysts in Madrid expect Fitch to upgrade or underpin with an improved outlook.

S&P confirmed France's long-term rating at AA with a stable outlook.

In a separate statement about the euro zone as a whole, Fitch said improving public finances were "major achievements" though still high debt levels in the region and its weak medium-term growth outlook warranted caution.

During a wave of euro zone credit downgrades during the financial crisis, policymakers and economists blamed ratings agencies for exacerbating investor flight from the region - blame the agencies say is misplaced.

Today, the mood seems to be shifting in Europe.

The euro zone's recession ended in the second quarter of last year. Market pressures on weaker countries has eased, in part because of domestic reform efforts but also due to an ECB pledge to do whatever it takes to save the euro. – TradeArabia News Service




Tags: Fitch | Euro zone |

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