Fitch Warns of Eastern European Downgrades if Greenland Strife Cracks NATO

A raft of European international locations might face a one-notch credit standing downgrade if tensions with the U.S. over Greenland fracture NATO and lift the prospect of extra bother with RussiaFitch’s high sovereign analyst mentioned on Thursday.

Fitch already applies a one-notch “adjustment” to scores in geopolitical scorching spots comparable to Israel, Taiwan and South Korea to replicate elevated dangers. Its head of sovereign scores, James Longsdon, informed Reuters the company could think about an identical method in Europe if the protection alliance weakens.

“Clearly that’s the one factor we’d have to take a look at for any of the sovereigns in Europe the place structurally we’d like to consider that,” Longsdon mentioned in an interview.

Learn extra: Denmark-US Rift Persists as NATO Nations Deploy to Greenland

Danish Prime Minister Mette Frederiksen, who has warned a battle with the U.S. over Greenland would spell the top of NATO, informed Reuters on Thursday there remained a “elementary disagreement” with the U.S. after President Donald Trump once more insisted that the U.S. “wants” Greenland.

Longsdon pressured that Fitch would “need to see how this stuff play out first” and that any score motion would require cautious evaluation, although proximity to Russia can be a key issue.

“It may very well be the place you felt the vulnerability to a geopolitical occasion can be most evident,” he mentioned.

“That’s the broad rule of thumb, so the additional away you might be from Russia, the least seemingly that’s to be the case.”

Longsdon mentioned it wasn’t attainable to place a timeline for any potential strikes given it remained theoretical, or if the cuts may very well be synchronized or occur individually in battle over Greenland broke out.

He additionally highlighted Moldova hadn’t but had this type of downward adjustment to its B+ score regardless of Russia sustaining about 1,500 troops within the breakaway area of Transdniestria, and that the state of affairs was difficult given some components of central and japanese Europe additionally had friendlier relations with Moscow than others.

Nevertheless, he mentioned tensions over Greenland had been unlikely to have an effect on Denmark’s triple-A score. Denmark is amongst a small group of European international locations with the highest credit score rating, alongside Germany, Switzerland and Norway, and has one of many lowest debt ranges within the shrinking international membership of triple-A sovereigns.

“Greenland is a big land mass, but it surely’s very small economically and fiscally for Denmark,” Longsdon mentioned. “It’s a very strong triple-A sovereign score, so I feel simply the dimensions differential makes it very onerous to see a state of affairs that will be so consequential.”

(Reporting by Marc Jones; modifying by Mark Potter and Diane Craft)