Portugal: Persistent Political Fragmentation to Test Growth and Fiscal Prospects

Scope sovereign rating levels and brackets rating outlook. Source: IMF World Economic Outlook, Scope Rating.Fiscal discipline improves primary balance, creates flexibility to address social pressures The fiscal discipline displayed in recent years enabled gradual governments to accumulate the budgetary headroom, causing some flexibility to gradually implement the measures of development. The previous advertising government took…

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Sovereign Credit: US Policy Shifts Point to Tariff-light, Trade-war, Economic-crisis Scenarios

If applied, tariffs will represent the largest peacock trade shock for the global economy over 100 years. If continuous, this policy shift will have significant credit implications for both the United States (AAA by scope with negative credit outlook) and both sovereign globally. Conversely, even their complete reversal, although unlikely, will not fully restore the…

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European Rearmament Plans: National Policy Choices Will Shape Fiscal Impact

Relying on debt-funded military expenses will weaken the credit approach of France and the UK, but a combination of limited fiscal flexibility and high bond yields can encourage the two governments to make necessary budgetary adjustments. In addition, Germany’s fiscal stimulus may have a favorable widespread impact on development, which will help soften the permanent…

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German Consumer Sentiment Sinks on Income Expectations; EUR/USD Holds Losses

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