DBRS rates European Union at triple A with stable outlook

DBRS rating confirmed the European Union rating at AAA with a stable outlook. The Eu's conservative budgetary management and the institution's preferred creditor status are two of the factors benefiting European rating. DBRS mantains a low short term risk view also if it warns that ratings could be lowered in case of a deterioration in the credit rating of the Eu's core member states and their committment to support the European Union.

DBRS rates the EU at AAA primarily on the basis of its Support Assessment, in which the credit ratings of the EU’s core member states are the primary factor. The ratings are underpinned by the creditworthiness of the EU’s core member states and their collective commitment to support the EU’s ability to repay its debt. The ratings also benefit from the EU’s conservative budgetary management with multiple arrangements that protect creditors, and the institution’s de facto preferred creditor status.

The Stable trend reflects DBRS’s view that the near term risks to the EU’s ratings are low. However, the ratings could be lowered if there is deterioration in the Support Assessment or if the EU were to experience a material deterioration in its risk profile. Multiple-notch downgrades of EU’s core member states could put downward pressure on the EU’s ratings, particularly if the credit deterioration is caused by flagging cohesion of the EU or a weakening of the political commitment of EU’s core member states and borrowers. In addition, ratings could be pressured if the withdrawal of a EU member state leads to a weakening of the commitment of the member states to the EU and results in less conservative budget management. 

The Support Assessment is based on the overall credit quality of the EU’s core member states and their collective commitments to support the EU. DBRS believes that EU member states have consistently shown strong commitment to supporting the EU’s key functions as demonstrated through the activation of a number of financial support mechanisms used in response to the financial crisis, as well as through funds that member states continue to contribute to the EU budget. Moreover, as established by the founding treaties, EU member states share joint responsibility to provide the financial resources required to service the EU's debt. In this context, the EU's rating is particularly sensitive to changes in the ratings of the four countries with the largest contributions to the EU budget: the Federal Republic of Germany (Foreign Currency rating of AAA, Stable trend), the Republic of France (AAA, Negative trend), the United Kingdom (AAA, Stable trend) and the Republic of Italy (A (low), Stable trend).