Fitch Ratings assesses European fiscal resilience amid Iran conflict

The credit rating agency Fitch Ratings has published a report analyzing the fiscal capacity of European nations to handle a potential energy crisis stemming from the conflict in Iran. According to the report, Belgium, France, and the United Kingdom have the least fiscal room to maneuver due to existing budgetary vulnerabilities. Conversely, countries such as Cyprus, Greece, Ireland, the Netherlands, Portugal, and most Scandinavian states possess greater fiscal flexibility, attributed to their recent record of fiscal prudence. The agency warns that the conflict contributes to inflation, weakened economic growth, and tighter financing conditions across the region. Countries like Germany and Spain, which have maintained deficits near 3%, are identified as having capacity to increase spending without significantly worsening their debt trajectories. Spain has already announced support measures equivalent to 0.3% of its GDP. However, the agency notes that further fiscal interventions will likely exert additional pressure on national deficits. Any such responses must be balanced to prevent a sharp deterioration in public debt levels.