The Moody’s agency confirmed a few days ago the “AAA” of the Grand Duchy. Blowing hot and cold on the economic policies of states, rating agencies have been shaking governments for decades. But what exactly are they for?
A rating of “AAA” with the mention “ perspective stable “. Just after the markets closed on Friday March 17, the American rating agency Moody’s rewarded ” Luxembourg’s economic resiliencethe good performance of public finances as well as the transparency and efficiency of government bodies “, as the government of Xavier Bettel welcomed when this note was announced.
Moody’s, Fitch Ratings, Standard & Poors… but who are these rating agencies, capable with just a few letters of playing justice of the peace on the economic policy conducted by a country?
Judge the capacity of a State to reimburse
First thing to consider: rating agencies are private (and for-profit) organizations. These are therefore not independent institutions, like the IPCC for the climate, for example. As reminded Finmarkets.com websiteexpert on the subject, these private companies “ evaluate the ability of debt issuers to meet their financial commitments ». Par « transmitters »we are talking here about a community, a company or therefore a State.
With regard to the Grand Duchy, the government indicates that l’agence Moody’s « expects Luxembourg to continue to respect the 30% of GDP threshold for public debt (…) According to Moody’s estimates, the level of public debt will increase from 26.3% in 2023 to 28.6% of GDP in 2024. Clearly, the solidity of the country’s public finances should enable it to continue to repay its debts and not to exceed the debt ceiling of 30% of GDP.
Scoring grids
Ranging from A to C, the ratings are, by definition, the heart of the rating agencies, each country hoping to approach or even obtain the so precious “AAA”, the ultimate pledge testifying to good economic and financial management.
If he is so envied by many organizations, multinationals and especially countries, it is because le triple A correspond « at the lowest possibility of default risk. This rating is only given in the case of an exceptionally high capacity to meet financial commitments. “recalls Finmarkets.com.
If the rating scale has 21 notches for Moody’s, those of Standard & Poor’s and Fitch Ratings differ slightly, as does the title of the ratings: behind the “AAA”, we find the ratings “AA1”, “AA2”, “AA3”, “A1”, “A2”, “A3”, “Baa1”, “Baa2″… at Moddy’s, when the two other major agencies list their ratings as follows: “AAA”, “AA+”, “AA”, “AA-“, “A+”, “A”, “A-“, “BBB+”, “BBB”, etc.
In the Greater Region, only Luxembourg and Germany benefit from a triple A. France lost it ten years ago, in 2013, and is now rated “Aa2” by Moody’s, “AA-” by Standard and “AA” by Fitch. For its part, Belgium is rated “AA3” by Moody’s, “AA” by Standard & Poor’s and “AA-” by Fitch.