H2 sovereign ratings outlook

Research evidence excerpt

H2 sovereign ratings outlook

Barclays | EGB Strategy

Outlook changes more likely than upgrades/

downgrades

2025 was a busy year for sovereign rating agencies, with 25 rating adjustments (including

outlook changes) for key euro area countries. Germany, the Netherlands and Ireland saw no

rating adjustments, but elsewhere there was a clear pattern in rating actions last year:

traditional periphery countries like Italy, Spain, Portugal and Greece all received one or more

upgrades and positive outlook changes, while core/semi-core countries like France, Belgium,

Austria and even Finland were at the receiving end of rating downgrades and/or negative

outlook changes. This convergence in ratings between the core and periphery blocs is a

manifestation of the continued convergence of debt to GDP metrics that we have written about

previously.

Compared to 2025, H1 26 was somewhat quieter on the ratings front, with fewer rating actions

(an S&P positive outlook for Italy, S&P and Fitch positive outlooks for Portugal, an S&P negative

outlook for Finland, an S&P upgrade of Ireland, and S&P and Moody's downgrades of Belgium).

Furthermore, there were concerns that the energy-shock-driven increase in financing costs as

well as the hit to growth and fiscal metrics could slow or altogether stop the upward ratings

momentum for periphery countries but increase the pressure on sovereigns with already weak

fiscal positions. While the jury is still out on how temporary or permanent the decline in energy

prices will prove, sovereigns are likely to slowly start phasing out their energy support

measures.

Looking to H2, we think outlook revisions are a more likely prospect than outright

upgrades / downgrades, for the most part. After all, across S&P, Fitch and Moody's, 26 stable