Fitch Alerts on Potential Eastern European Downgrades Amid Greenland Tensions Impacting NATO
A raft of European countries could face a one-notch credit rating downgrade if tensions with the U.S. over Greenland fracture NATO and raise the prospect of more trouble with Russia, Fitch’s top sovereign analyst said on Thursday.
Fitch already applies a one-notch “adjustment” to ratings in geopolitical hot spots such as Israel, Taiwan, and South Korea to reflect elevated risks. Its head of sovereign ratings, James Longsdon, told Reuters that the agency may consider a similar approach in Europe if the defense alliance weakens.
“Clearly that’s the one thing we’d have to look at for any of the sovereigns in Europe where structurally we need to think about that,” Longsdon said in an interview.
Read more: Denmark-US Rift Persists as NATO Nations Deploy to Greenland
Danish Prime Minister Mette Frederiksen has warned that a conflict with the U.S. over Greenland could spell the end of NATO. She noted a “fundamental disagreement” with the U.S. after President Donald Trump reiterated that the U.S. “needs” Greenland.
Longsdon emphasized that Fitch would “have to see how these things play out first” and that any rating action would require careful assessment. Proximity to Russia would be a key factor in this evaluation.
“It could be where you felt the vulnerability to a geopolitical event would be most obvious,” he explained. “That’s the broad rule of thumb, so the further away you are from Russia, the least likely that is to be the case.”
Longsdon stated that it wasn’t possible to put a timeline on any potential moves, given that the situation remains theoretical. He also noted that it’s uncertain whether any rating cuts could be synchronized or happen individually if conflict over Greenland were to escalate.
He highlighted that Moldova hasn’t yet experienced this kind of downward adjustment to its B+ rating, despite Russia maintaining about 1,500 troops in the breakaway region of Transdniestria. The situation is further complicated by the fact that some parts of central and eastern Europe have friendlier relations with Moscow than others.
However, he indicated that tensions over Greenland are unlikely to affect Denmark’s triple-A rating. Denmark is among a select group of European countries with the highest credit score, alongside Germany, Switzerland, and Norway, and boasts one of the lowest debt levels in the shrinking global club of triple-A sovereigns.
“Greenland is a large land mass, but it’s very small economically and fiscally for Denmark,” Longsdon remarked. “It is a very solid triple-A sovereign rating, so I think just the size differential makes it very hard to see a situation that would be so consequential.”
(Reporting by Marc Jones; editing by Mark Potter and Diane Craft)
A raft of European countries could face a one-notch credit rating downgrade if tensions with the U.S. over Greenland fracture NATO and raise the prospect of more trouble with Russia, Fitch’s top sovereign analyst said on Thursday.
Fitch already applies a one-notch “adjustment” to ratings in geopolitical hot spots such as Israel, Taiwan, and South Korea to reflect elevated risks. Its head of sovereign ratings, James Longsdon, told Reuters that the agency may consider a similar approach in Europe if the defense alliance weakens.
“Clearly that’s the one thing we’d have to look at for any of the sovereigns in Europe where structurally we need to think about that,” Longsdon said in an interview.
Read more: Denmark-US Rift Persists as NATO Nations Deploy to Greenland
Danish Prime Minister Mette Frederiksen has warned that a conflict with the U.S. over Greenland could spell the end of NATO. She noted a “fundamental disagreement” with the U.S. after President Donald Trump reiterated that the U.S. “needs” Greenland.
Longsdon emphasized that Fitch would “have to see how these things play out first” and that any rating action would require careful assessment. Proximity to Russia would be a key factor in this evaluation.
“It could be where you felt the vulnerability to a geopolitical event would be most obvious,” he explained. “That’s the broad rule of thumb, so the further away you are from Russia, the least likely that is to be the case.”
Longsdon stated that it wasn’t possible to put a timeline on any potential moves, given that the situation remains theoretical. He also noted that it’s uncertain whether any rating cuts could be synchronized or happen individually if conflict over Greenland were to escalate.
He highlighted that Moldova hasn’t yet experienced this kind of downward adjustment to its B+ rating, despite Russia maintaining about 1,500 troops in the breakaway region of Transdniestria. The situation is further complicated by the fact that some parts of central and eastern Europe have friendlier relations with Moscow than others.
However, he indicated that tensions over Greenland are unlikely to affect Denmark’s triple-A rating. Denmark is among a select group of European countries with the highest credit score, alongside Germany, Switzerland, and Norway, and boasts one of the lowest debt levels in the shrinking global club of triple-A sovereigns.
“Greenland is a large land mass, but it’s very small economically and fiscally for Denmark,” Longsdon remarked. “It is a very solid triple-A sovereign rating, so I think just the size differential makes it very hard to see a situation that would be so consequential.”
(Reporting by Marc Jones; editing by Mark Potter and Diane Craft)
