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EU credit rating at risk if UK doesn’t pay Brexit bill

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The European Union’s credit rating could be put at risk if the UK does not pay its Brexit bill, which could be as much as €60bn.

S&P Global says that though the claims were unlikely to be legally enforceable and a non-payment would not constitute a default, the EU’s rating could come “under pressure” if the UK did not settle its debts, Reuters reports.

S&P says: “The European Union (AA-Stable/A-1+) ratings could come under pressure in an adverse scenario.

“This is because our ratings on the EU are to a certain extent predicated on our expectation that the UK would honour its share of financial obligations to the EU.”

S&P adds that the ratings of multilateral lenders that the UK pays into could also come under pressure.

These include the European Investment Bank, the Inter-American Development Bank, Council of Europe Development Bank, African Development Bank, and Eurofima.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. And the current state of the accounts of the EU doesn’t have any bearing on this at the moment? No signed off accounts for 18 years? Seriously. A €200 billion black hole already which that clampet Junkers tried to make dissappear? Why does the EU have any form of decent credit rating at all now? Beyond me

  2. Pure fiction or fake news about the EU not signing off accounts. “The fact is that, contrary to the convincing assertions by some UK media, the EU accounts have been passed by the independent auditors every year since 2007 as accurate, legal, regular and reliable. Furthermore, the EU has no debt or borrowings and the books are always balanced every year. (From 1994 to 2004, the EU budget was subject to cash-based accounting. Improved accruals-based accounting was introduced in 2005. The European Court of Auditors gave qualified approval to accounts until 2006, and unqualified approval – ‘clean’ opinion – since 2007.)
    It’s true that the auditors strongly criticised EU expenditure for having 4.7% of errors – these were essentially administrative mistakes, and specifically not fraud – but then, all government accounts across the world have a percentage of managerial errors. For example, in some recent years, the US government accounts had error rates higher than 5% – worse than the EU. In the UK, some government department budgets have error rates bigger than the EU budget. For example, according to the National Audit Office, Housing Benefit fraud and error has increased to 5.8%.
    Since 2006, EU budgets have suffered from an annual ‘error rate’ ranging from 3.3% to 7.3%. Anything above 2% is categorised as ‘material error’. The Auditors, however, commended the European Commission for making strenuous efforts in trying to reduce the error rate to 2% or below.
    Almost all of the errors didn’t take place in Brussels at all, but by EU member states at national government level.”
    If the UK (if it’s still the UK by then) leaves without paying the bill, then despite what the learned Lords have to say about it, it will be classed as a default and our credit rating will plunge to junk status. Hopefully by then the stupidity of Brexit will have been fully revealed and the public will demand another referendum before we jump off May’s cliff.

  3. Ken, very informative thank you as I, for one, was certainly under the impression that the EU’s accounts were in a mess but can you clarify some points please?
    1. Are accounts being passed, with qualified approval, the same as being signed off?
    2. What is the role and the responsibilities of the European Court of Auditors, why have the moved from qualified to unqualified approval when, surely, the EU is working harder and harder to put its house in order in to resolve the criticism of unaccountability being levelled against?
    3. You have clearly thoroughly researched the above so please explain/point me towards the officially and independently confirmed sources that state that our credit rating will ‘plunge’ rather than fall, dip or improve or whatever?

    IMHO ,it was a real pity that you spoilt your very balanced piece by indulging in unnecessarily inflammatory comments in the last paragraph. The Brexit vote was not a choice between leave or the status quo, a remain vote would have been the signal to accelerate and deepen the integration with the EU which might (and I only say might) have led to us having no option to adopt the euro. With the problems the eurozone is facing that outcome was not attractive to me. One final question is, again, what hard, confirmed, irrefutable evidence can you share which shows that we will jump off a cliff or abseil down it? Many thanks with courtesy and respect.

  4. Neil F Liversidge 11th April 2017 at 2:54 pm

    So if we don’t pay money that we don’t owe, that will affect our credit rating? This from the firm (S&P) who SOLD bond ratings leading to the near collapse of global markets! These people need to be told to go forth and multiply / depart in jerky movements.

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