Mark Jones
LONDON, Jan 15 (Reuters) – Europe could face a wave of credit rating downgrades if tensions between Greenland and the United States lead to a breakdown in NATO, Fitch’s chief sovereign analyst said on Thursday.
Fitch has already made one-notch “adjustments” to ratings on geopolitical hotspots such as Israel, Taiwan and South Korea to reflect rising risks. Its head of sovereign ratings, James Longsdon, told Reuters the agency may consider a similar approach in Europe if the defense alliance weakens.
“Obviously it’s something that we have to think about for any sovereign country in Europe, structurally we need to think about that,” Langsden said in an interview.
Danish Prime Minister Mette Frederiksen has warned that a conflict with the United States over Greenland would mean the end of NATO. She told Reuters on Thursday that Denmark still had “fundamental differences” with the United States after President Donald Trump once again insisted that the United States “needs” Greenland.
Langston stressed that Fitch “has to see how these things develop first” and that any rating action would need to be carefully evaluated, although proximity to Russia would be a key factor.
“This is probably where you would think most vulnerable to geopolitical events,” he said.
“That’s a broad rule of thumb, so the further away you are from Russia, the less likely it is to happen.”
However, he said tensions in Greenland were unlikely to affect Denmark’s AAA rating. Denmark is among a small group of countries with the highest credit scores in Europe, alongside Germany, Switzerland and Norway, and has one of the lowest debt levels in the shrinking global club of triple-A sovereigns.
“Greenland is huge, but for Denmark it’s economically and fiscally small,” Langsden said. “It’s a very solid AAA sovereign rating, so I think it’s hard to see the size difference alone being that significant.”
(Reporting by Mark Jones. Editing by Mark Porter)
