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A fiscal perspective on EU sovereign credit ratings

Wickens, M. and Polito, V., (2013), “A fiscal perspective on EU sovereign credit ratings: Did the credit-rating agencies get them right?”, VoxEU, 30 October.

A good credit rating has become a key fiscal objective, even if it requires austerity when unemployment is high. Recent experience has raised doubts about the sovereign ratings provided by the credit-rating agencies. This column suggests a new way to measure credit ratings based on a country’s ability to meet its liabilities using fiscal policy. This measure would have identified and signalled to market participants signs of the impending European sovereign-debt crisis well before 2010, when the rating agencies first reacted to the crisis.

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