Fitch report assesses European fiscal space amid Iran conflict energy risks

A new report from Fitch Ratings evaluates the capacity of European sovereigns to absorb an energy shock resulting from the conflict in Iran. The agency identifies Belgium, France, and the United Kingdom as having the least fiscal flexibility due to existing vulnerabilities, inflation, and tighter financing conditions. Conversely, Cyprus, Greece, Ireland, the Netherlands, Portugal, and most Scandinavian nations are noted for having greater fiscal space to respond to crises. This assessment is based on their historical record of fiscal prudence, though they are advised to exercise moderation to prevent debt and deficit spikes. Countries like Germany and Spain, which have maintained deficits near 3 percent, also retain some capacity to support businesses and households. Spain has already initiated measures amounting to 0.3 percent of its GDP, while Germany is expected to continue defense and investment expenditures. The agency warns that further interventions will exert pressure on national deficits.