By Marc Jones
LONDON, Jan 15 (Reuters) – Europe could face a wave of one-notch credit rating downgrades if tensions with the U.S. over Greenland fracture NATO, Fitch’s top sovereign analyst said on Thursday.
Fitch already applies a one-notch “adjustment” to ratings in geopolitical hot spots such as Israel, Taiwan and South Korea to reflect elevated risks. Its head of sovereign ratings, James Longsdon, told Reuters the agency may consider a similar approach in Europe if the defence alliance weakens.
“Clearly that’s the one thing we’d have to look at for any of the sovereigns in Europe where structurally we need to think about that,” Longsdon said in an interview.
Danish Prime Minister Mette Frederiksen, who has warned a conflict with the U.S. over Greenland would spell the end of NATO, told Reuters on Thursday there remained a “fundamental disagreement” with the U.S. after President Donald Trump again insisted that the U.S. “needs” Greenland.
Longsdon stressed that Fitch would “have to see how these things play out first” and that any rating action would require careful assessment, though proximity to Russia would be a key factor.
“It could be where you felt the vulnerability to a geopolitical event would be most obvious,” he said.
“That’s the broad rule of thumb, so the further away you are from Russia, the least likely that is to be the case.”
However, he said tensions over Greenland were unlikely to affect Denmark’s triple-A rating. Denmark is among a small group of European countries with the top credit score, alongside Germany, Switzerland and Norway, and has one of the lowest debt levels in the shrinking global club of triple-A sovereigns.
“Greenland is a large land mass, but it’s very small economically and fiscally for Denmark,” Longsdon said. “It is a very solid triple-A sovereign rating, so I think just the size differential makes it very hard to see a situation that would be so consequential.”
(Reporting by Marc Jones. Editing by Mark Potter)
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