KBRA Affirms AAA/K1+ Ratings for the European Union With a Stable Outlook

KBRA Europe (KBRA) affirms its long-term issuer rating of AAA to the European Union (EU). KBRA also affirms its short-term issuer rating of K1+ to the supranational. The Outlook on the long-term rating is Stable.

KBRA's credit ratings for the EU reflect the creditworthiness of the EU’s key member states and their commitment to ensuring the continued soundness of the EU’s finances, based on the balanced budget principle and a legally enshrined debt service priority. These factors, combined with significant budgetary flexibility—including recourse to additional timely member support if and when needed, which functions like a joint and several guarantee—are key to the EU’s credit profile. The EU’s proven track record of excellent governance and an irreplaceable mandate for its member states, which has been reinforced by the bloc’s responses to the pandemic and the Russia-Ukraine war, also support our credit ratings. In addition, the EU benefits from a strong liquidity profile, driven by high, prudently managed liquid assets, good market access, and a diversified funding base. The EU’s asset quality benefits from preferred creditor status and the institution has never incurred losses or restructured any loans in its portfolio. The expected rise in guarantees is not viewed as a meaningful credit risk, given the assets of guarantee funds and a relatively high provisioning rate for less established programmes. KBRA notes that the anticipated increase in outstanding borrowings will result in higher debt repayments. However, this is mitigated by higher budgetary headroom, member-state obligations to finance the agreed expenditure levels, and the aim to introduce new EU own resources to facilitate debt payments.

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