Chart of the Week
France’s national debt is in the spotlight following the country’s ratings downgrade to AA- by Standard & Poor’s on 31 May and the dissolution of the National Assembly on 9 June. The outcome of the snap election could be a new government with lavish plans for the economy. Since 10 June, the difference between French and German borrowing costs has increased and this rise in risk premia is spreading to other European states.
The exceptions are the Nordic economies (Norway, Sweden, Finland and Denmark), where public finances are notably robust. Since the pandemic, Nordic countries have mostly returned to balanced budgets or, in Norway’s case, a significant surplus.
OUR ANALYSIS
The Nordics have a particularly strong track record at managing their public finances. Norway reaps benefits from exporting its oil and gas, the price of which rose sharply in 2022. Although Denmark, Sweden and Finland lack this natural advantage, they are highly committed to controlling government debt. According to Eurostat 2023 data published on 22 April 2024, Sweden has a debt-to-GDP ratio of just 31.2% and Denmark 29.3%. While Finland, with a ratio of 75.8%, has more debt, it remains well below France’s 110.6%.
Sound and sustainable public finances create a favourable business climate in these countries, where companies stand out for their capacity to foster innovation. Since the start of 2024, Nordic equity markets have overcome the challenges of rising inflation and interest rates, recovering an ability to outperform other European markets.
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Written on June 21, 2024. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/european-high-yield-a-buoyant-primary-market/
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