Euro Area Credit Scores Converge as Borrowing Rises Slightly Across 20 Nations

Q: As Germany's and France's credit worsens, which nation is the new 'safe haven' for European investors?

Switzerland is the clearest answer. The Scope Ratings story says euro-area sovereign credit is converging because former crisis countries have improved while once “safe” borrowers such as Germany and France have weakened. But neither the report nor the related euro-area material identifies a new eurozone sovereign replacing Germany as the bloc’s unquestioned refuge. The broader evidence points instead to Switzerland as Europe’s de facto safe haven. The Swiss franc remains widely treated by markets as a classic haven currency, and recent commentary describes Switzerland as the “ultimate safe haven” because of its fiscal discipline, political stability, legal protections and long-standing neutrality. Reports of rising cross-border wealth inflows into Switzerland reinforce that view. That said, for euro-denominated investors there is also a second, more structural answer: no single euro-area country has clearly taken Germany’s place. Much of the policy debate now centers on creating a common European safe asset through larger-scale EU bonds or Eurobonds, precisely because national safe assets are seen as too limited or less secure than before. So in practical market terms, Switzerland is the main national safe haven. Within the euro area itself, the safer long-term substitute is being framed less as another country and more as joint EU debt.

1 articles · Updated · Bloomberg · Jun 15

Scope Ratings said euro-area sovereign credit scores are moving closer together, marking a broader convergence across the bloc despite sharply different national trends.
Slightly higher aggregate borrowing is accompanying that shift, with Scope describing the region as moving toward a new equilibrium rather than returning to earlier rating gaps.
Countries hit hardest during the euro-zone sovereign crisis are still improving, while some borrowers once viewed as safer are deteriorating, narrowing the spread between national credit profiles.
The pattern points to a euro area whose sovereign risk is becoming more evenly distributed across its 20 member states, even as the drivers of change differ from country to country.