The EU budget is financed by contributions from the 28 member states and not EU-wide bond sales, and its credit rating is based on the perceived sovereignty of its members. There is little risk that the EU will not be able to access capital markets, S&P said.
A lack of cohesion and solidarity among EU member states, particularly regarding the budget process, poses a credit risk, S&P said in today’s statement.
“EU budgetary negotiations have become more contentious, signaling what we consider to be rising risks to the support of the EU from some member states,” the ratings company said.
The European Commission, the EU executive in Brussels, “disagrees with S&P that Member State obligations to the budget in a stress scenario are questionable,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement. “The commission underlines that the EU rating with the two other major rating agencies, Fitch and Moody’s, is AAA.”
The EU countries that make the biggest contributions to the bloc’s budget have been pushing for reductions in their shares, while the U.K. plans a referendum on whether to remain a member of the bloc.
This is “the first time in the EU’s history that a sitting government has proposed such a step,” S&P said. “Although this potential plebiscite is set for 2017, the U.K. general elections are expected in 2015 and we expect EU membership to be a key debate.”