Country rating: The current credit rating of the EU countries
Country rating overview: How creditworthy are the countries in Europe?
When it comes to the country rating, Europe is divided into three parts: countries such as Germany, Norway and Switzerland are at the top with a triple-A rating. A solid midfield follows from very well to satisfactorily rated countries such as Belgium, Austria, Spain or Finland. The risky part with countries like Greece or Turkey is something for investors who are willing to take a risk when investing.
Countries in Europe with the best credit rating
The following table shows the European countries with the best rating of the rating agencies in alphabetical order. Here you can safely invest money in a foreign currency account, for example.
These countries receive top marks in the country rating
|Liechtenstein||AAA||No rating||No rating|
Countries with high credit ratings
Some European countries do not have top marks, but are rated “very good”, “good” or “satisfactory” by the rating agencies. This corresponds to rating grades between AA + and Baa1. According to school grades, this would still be a 1, a 2 or a 3. For you as a saver, this means that you can invest your money in fixed-term deposit accounts in these countries without great risk.
These countries are rated with very good, good and satisfactory credit ratings
|Finland||AA +||Aa1||AA +|
|Austria||AA +||Aa1||AA +|
|Slovakia||A +||A2||A +|
Countries with increased risks
According to the ratings of the rating agencies, some European countries are at increased risk for investors. Anyone investing here must expect that if the economic situation in these countries deteriorates further, payment defaults may result. Investments are risky, they are speculative or even highly speculative.
These countries have poor credit ratings
|Albania||B +||B1||no rating|
|Macedonia||BB-||no rating||BB +|
|Moldova||no rating||B3||no rating|
|Montenegro||B +||B1||no rating|
What do the country credit ratings mean?
The triple A – three times A – is the best rating of the rating agencies in Moody’s Rating, Standard & Poor’s Rating and Fitch Ratings and is therefore the same for all three large agencies. Below this AAA country rating there are different grades, as the following graphic shows. The lowest rating is D, meaning a country’s insolvency.
How are the grades for the country rating determined?
The assessment is based on two factors.
- Factor one are complicated mathematical models that evaluate the central economic data such as gross domestic product and the investment volume within a country.
- Factor two are soft criteria such as the political situation and social stability of a country.
However, the rating agencies do not fully disclose how they arrive at their ratings.
What does country rating mean?
Global rating agencies assess the creditworthiness of countries. This is done in the form of a rating, the agencies call this rating credit ratings. This gives a very simplified indication of how creditworthy a country is. You know a similar procedure from lending in the private sector with Credit Bureau, which determines the creditworthiness of people with the Credit Bureau score.
The country rating also gives you information about whether an investment in a country is safe or risky. The rating of the countries creates tables that offer a good overview: from very safe countries to a high country risk.
Already knew? The world’s leading rating agencies are Standard & Poor’s (S&P), Moody’s and Fitch Ratings. All attempts at competition, such as the Chinese Dagong rating, have so far been without any notable success against these market leaders.
Where can I safely invest my money after the country rating in Europe?
If you want to be on the safe side, use the European country rating and pay attention to investing in countries with at least twice the letter A. Here, so many positive factors have been included in the assessment that promise stability. A prominent example of recent times is Great Britain, where the complex and unpredictable consequences of Brexit have so far not changed the safety of the plant. Another example is Austria, where the sudden break in the coalition of ÖVP and FPÖ had no effect. The Triple-A promises the greatest possible security.
Tip: You can find a good overview of the current range of investments in overnight and fixed deposits in many European countries in our overnight deposit comparison and in our fixed deposit comparison.
The rating of the country’s credit rating can change
An example from the 2007 financial crisis shows that the question of how creditworthy which countries are is not necessarily answered reliably by the top grade. A few months before the onset of the financial crisis, Iceland was rated AAA and soon thereafter faced state bankruptcy.
Tip: You can find a regularly updated overview of the ratings of all countries worldwide, which are rated by the three major rating agencies, at the Across Lender.
What happens to my investment if my country’s credit rating is poor?
In such countries, the risk of losing your investment increases. In the states of the European Union, your investment is protected up to $ 100,000 by the statutory deposit insurance. This deposit insurance was introduced as a result of the financial crisis for consumer protection. The idea behind it: if a bank goes bankrupt, the nation state takes over the security. However, if the nation state also has to declare state bankruptcy, this can be fatal to creditors. There is no bankruptcy money for states. That means that in the European Union the other member states would have to step in. The practical test that this runs smoothly is pending.
What is the risk of investing outside of Europe?
Outside of Europe, the risk of total loss is even greater. The Argentine state bankruptcy in 2001 is an example of this. Above all, foreign creditors lost their assets without replacement. There is also an additional risk if the credit rating is poor: if the rating agencies devalue the country again, the conditions for the country on the capital market will deteriorate. This can trigger a negative spiral that can lead to national bankruptcy.