Dec 20 (The following statement was released by the rating agency)
Fitch Ratings says that the 2014 gross* government borrowing for European sovereigns will be down compared with 2013, with an estimated drop of 1.2% to EUR1,811bn from 2013's EUR1,832bn.
For the 17 euro area countries as a whole, gross borrowing will be down 2.9% year on year (yoy) to EUR1.5trn, or 15.1% of GDP. This compares favourably with Japan and the US, which face 2014 gross borrowing requirements of around 37% and 22% of GDP, respectively.
In absolute terms, government borrowing is largest in Italy (EUR393bn), France (EUR352bn), the UK (EUR267bn) and Spain (EUR216bn). As a share of GDP, it is largest in Cyprus (31%), Portugal (26%), Italy (25%), Greece (24%) and Slovenia (23%). Overall, gross borrowing has decreased yoy for the majority of European governments, with the notable exceptions of Slovenia (up 13.3% of GDP, largely due to high expected bank recapitalisation costs) and Portugal (up 6.1% of GDP due to a heavier redemption schedule in 2014).
"Fiscal tightening is delivering results, helped by a gradual economic recovery in Europe. Central government net borrowing estimates for 2014 indicate an impressive 21% reduction on 2013 levels," says Douglas Renwick, Senior Director in Fitch's Sovereign team.
"Refinancing needs - the largest portion of gross borrowing for European governments - are up 8.4% year-on-year in 2014. Italy, the UK, and Greece will be seeing the largest increases in medium and long-term debt redemptions. In Greece, this is a result of EUR7.4bn of IMF loans coming due," adds Mr. Renwick.
With the revision of the rating outlooks on France, the UK, Belgium, and Spain to Stable in 2013 - after downgrades in France and the UK - only 30% of the EU15 gross borrowing requirement for 2014 is for governments with sovereign ratings on Negative Outlook. This is a significant decrease on the 74% for 2013.
In line with this, the marginal cost of funding for peripheral euro area countries has fallen significantly, with the spread to core euro area countries down 130bp yoy to 240bp in December 2013. High-grade yields, on the other hand, have risen after the Fed's taper pre-announcement in May 2013. Fitch expects these trends to continue into 2014.
The report, entitled "European Government Borrowing
Link to Fitch Ratings' Report: European Government Borrowing in 2014
*Fitch defines gross borrowing as net cash borrowing plus redemptions on medium and long-term debt plus the stock of short-term debt at the end of the previous year (which will need to be rolled over at least once during the current year).