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Surveys

ECR Survey Results Q1 2012: Eurozone stabilizes in global rankings

The eurozone enjoys its strongest quarter since March 2010 in the latest results of Euromoney’s country risk survey, as European policymakers finally come to grips with the crisis. But lower scores for Greece and France suggest Europe is not out of the woods yet. Andrew Mortimer reports

The descent of the eurozone in Euromoney’s global country risk rankings slowed in the first quarter of 2012, as a number of sovereigns in both the core and the periphery receive improved rankings from participating economists.

Italy and Spain each rise one place in the rankings in Q1, bringing to a halt the steep decline both countries have experienced since 2010. Finland also sees its rating improve by one place in the global table, while Germany, Austria and Belgium retain their previous positions.

The result is a further signal that the unorthodox policy measures pursued by the ECB and the fiscal pact agreed by euro-area politicians have increased investor confidence in the viability of the single currency, at least for now.





Eurozone country risk scores: No longer in free fall
Country ECR Rank Q1 2012 ECR Score Q1 2012 Rank change in Q1 Rank change since March 2010
Finland 5 85.3 1 0
Netherlands 9 83.8 -1 0
Germany 13 81.9 0 -2
Austria 14 81.2 0 -7
France 18 75.1 -1 -6
Belgium 21 71.8 0 -7
Italy 36 63.2 1 -12
Spain 39 61.8 1 -14
Ireland 48 57.3 -2 -27
Portugal 61 52.2 0 -30
Greece 120 33.1 -5 -87
Source: Euromoney Country Risk (

However, not all euro-member states perform well. Greece falls a further five places in the rankings in Q1, despite the country’s record sovereign debt restructuring in March 2012. France slips a place in the table after receiving lower political risk scores as the presidential election approaches, while Ireland, the zone’s third riskiest sovereign, also falls two places in the rankings.

More than 400 economists and country-risk specialists from a range of financial institutions take part in Euromoney’s country risk survey. They evaluate the risks faced by international investors in more than 180 markets, scoring countries across a range of political, economic and structural criteria.

Among the eurozone’s remaining triple-A rated sovereigns, Germany, Luxembourg and Austria see receive unchanged rankings, while Finland and the Netherlands finish the quarter one place higher and lower, respectively.

Italy and Spain, which have fallen steeply in the global risk rankings since March 2010, both finish the quarter higher after receiving improved scores for political risk from economists. Higher scores are an apparent vote of confidence in the direction taken by the new governments in both countries since November 2011, when Mariano Rajoy’s PP party defeated the socialists in the Spanish general election and Mario Monti took over as Italian prime minister.

France bucks the otherwise positive trend, falling by one place since December 2011 to 18th globally, leaving it below ranked Chile in the table. France received declining scores for economic risk and also for political risk, a concerning development as market attention turns towards the country’s approaching presidential elections later this month.

Greece falls a further five places, taking its cumulative fall to a record 87 places since March 2010, despite the country successfully undertaking the largest sovereign debt restructuring in history in March. Greece’s scores in almost every survey indicator of economic, political and structural health have deteriorated since December, as economists have updated their scores to reflect the extent of the country’s deepening economic contraction. As its government undertakes further austerity measures against a domestic backdrop of 21% unemployment as of December 2011, Greece has now fallen to 120th globally, a place below Gambia.

Elsewhere in the periphery, Portugal, the eurozone’s second riskiest country, retains its ranking at 61st, while Ireland falls two places to 48th in the world, one place below Panama.

Results for the US and UK both fall one place in the rankings, despite firmer economic data from the US during the quarter.

The US received reduced scores from economists in the survey indicators for hard infrastructure, suggesting economists consider the country’s deficiencies in this area a long-term impediment to growth. The country also received declining scores in the survey’s political assessment in the run-up to the presidential elections later this year.

In the UK, economists reduced the country’s economic scores for the third quarter in a row, after data showed the UK economy contracted in the fourth quarter of 2011. The UK saw corresponding score reductions for employment, bank stability and economic outlook. With its relatively high public-debt levels and low growth outlook resulting in a lower rating than many other advanced economies like France, the US and Germany, the UK’s score has fallen below a number of emerging markets in recent quarters, including Taiwan, Chile and Qatar.

Chile, Peru, Mexico, Panama and Brazil all climb by one place or more in Latin America, as scores for the region’s top sovereigns continue to be supported by near-record scores in the survey’s access to capital markets indicator, illustrating the continued attractiveness of the region as a destination for global investment. While scores for economic stability were slightly down over the quarter due to lower growth forecasts in 2012 versus 2011, political risk scores were broadly stable during the quarter. Laggards Venezuela and Argentina were notable exceptions, falling by six and four places respectively in the table in Q1 (See recent article published by Euromoney: ‘Country risk: Hot Chile leaves the region trailing’ for further analysis of the region’s risk profile).

Asia receives mixed results, despite the region’s high growth rate compared to other regions. China, Korea and Taiwan each saw their rankings rise a place in the table, but economists had a sceptical attitude towards the Asean countries, with Indonesia (down six), the Philippines (down three), Thailand (down one) and Vietnam (down five) all suffering falls. Scores for economic stability were negative across the region, as economists lowered indicators for bank stability and monetary policy/currency stability, despite the strong performance of many regional equity indexes and currencies. By contrast, Japan’s high debt and stagnant growth outlook sees it fall two places in the table, to 28th.

In EMEA, the Czech Republic (up two) was one of the top performers, while Hungary (down two) and Belarus (down four) continued to be poorly regarded by economists. Qatar (19th) remains the top-ranked MENA sovereign, but second-placed Kuwait narrows the gap, rising four places to 25th. In Sub-Saharan Africa, Côte d’Ivoire (up four) and Senegal (up 14) are among the region’s best performers.

This article was originally published by Euromoney Country Risk.

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