KBRA Affirms AAA/K1+ Ratings for the European Union; Outlook Stable
14 Mar 2025 | Dublin
KBRA Europe (KBRA) affirms its AAA long-term issuer rating for the European Union (EU). KBRA also affirms the supranational’s K1+ short-term issuer rating. The Outlook on the long-term rating is Stable.
| This credit rating is an unsolicited credit rating. | |
|---|---|
| With Rated Entity or Related Third-Party Participation | Yes |
| With Access to Internal Documents | Yes |
| With Access to Management | Yes |
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 KBRA’s view, the EU’s response to these shocks has demonstrated strong political commitment and cohesion in the union. This cohesion has been further reinforced by the recently announced proposal by the European Commission that could mobilise up to EUR800 billion in additional national spending aimed at strengthening defence capabilities, a direct response to US President Trump’s call to scale back the US security commitment to Europe. 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 payments for the parts of the debt that are repaid by the EU budget.
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