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a day ago
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Italy's working age population set to shrink by one fifth, statistics agency says
ROME (Reuters) -Italy's working age population is set to shrink by more than a fifth over the next 25 years, national statistics agency Istat said on Monday, highlighting the country's severe demographic challenges. Italy is battling with a falling birth rate and a shrinking population. Last year new births dropped to a record low of around 370,000, and the population fell by 37,000 to 58.93 million, continuing a decade-long trend. In its latest demographic forecast, Istat predicted that the number of people in the 15-64 age group would fall from 37.4 million in 2024 to 29.7 million in 2050, with their share of the total resident population falling to 54.3% from 63.5%. In the same period, the percentage of residents over the age of 65 is projected to rise to 34.6% of the total, from 24.3% currently, and the share of children up to the age of 14 to fall to 11.2% from 12.2%. Italy's long-declining birth rate is considered a national emergency. But despite Prime Minister Giorgia Meloni and her predecessors' pledges to tackle the issues, no one has so far been able to halt the drop. Istat estimated on Monday that Italy's resident population would fall to 54.7 million by 2050, although it added that its forecast had a large margin of variability and uncertainty linked to migration trends. In a report last year, Scope Ratings said Italy's demographics were the worst in Europe in terms of economic growth potential between 2023 and 2040, with a rapidly ageing population posing a threat to strained public finances. Solve the daily Crossword
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4 days ago
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EU's Sluggish Economy Faces Moderate Growth Slowdown from US Trade Tensions
A US-EU deal appears increasingly likely. The recent trade agreement between the US and Japan has increased pressure on the EU and other trading partners to pursue a similar arrangement. Ongoing negotiations suggest that a 15% levy on most EU exports to the US might be introduced, with EU officials pushing to have this rate applied to certain sectors, including automobiles. Steel and aluminium imports above a certain quota might face the current higher levy of 50%. President Donald Trump has persisted with his policy of imposing higher tariffs on trading partners, so the EU faces a potential 30% tariff without an agreement, up from the 20% tax imposed in April and then paused, although still below the 50% rate threatened in May. The EU has avoided direct retaliation to date. Scope Ratings (Scope) expects this cautious approach to continue, even as the EU prepares possible counter-measures. Nevertheless, the approach risks growing tariff asymmetries particularly if US levies on EU goods rise more quickly than EU levies on US exports. Scope's model-based estimates suggest that the implementation of a 15% US tariff would trim euro area and EU growth within a year by increasing the effective US tariff on EU exports by around 16pps, excluding the proposed across-the-board 30% rate (Figure 1). This estimate assumes threatened levies on pharmaceutical exports go into effect. The most-exposed EU economies are those with a large trade surplus and/or significant trade with the US, such as Germany and Ireland, with the impact of higher tariffs also felt indirectly through their effect on global supply chains. Among the EU's four largest economies – Germany, France, Italy and Spain – Germany and Italy are the most vulnerable, each facing an estimated short-term output loss of 0.4pps. The higher tariffs will reduce Spain's output by a moderate 0.3pps in the medium run. France is expected to experience a more modest cumulative reduction in output of 0.2pps in the medium term. Trade tensions underpinned the reduction last month of Scope's forecast for euro area growth for 2025 by 0.5pps to 1.1% though growth is expected to improve to 1.5% next year, lifted by fiscal stimulus in Germany and higher defence spending across the EU. Figure 1. US tariff rises set back growth in the largest EU economies Cumulative impact on real output (percentage-point change) assuming a 15% levy on EU exports Threatened 30% Levies Would Raise Economic Costs for the EU Economy Alternatively, if the US goes ahead with the threatened imposition of 30% tariffs on the EU on 1 August, equivalent to a rise in the effective US rates by around 26pps in aggregate this year, and the EU adopts counter-measures, the adverse effect on growth in the EU would clearly be more significant. For illustrative purposes, if both the 30% levies imposed by the US and EU counter-measures come into force on or shortly after 1 August and hypothetically stayed at the higher rates in the years ahead, Scope estimates suggest an aggregate output loss of 0.6pps by 2028 for the euro area and 0.5pps for the EU economy (Figure 2). Figure 2. EU, euro area economies are vulnerable to the imposition of much higher US levies Cumulative effect on real output (percentage-point change) in a scenario of 30% US tariff, EU countermeasures Averting this potentially damaging trade outcome for Europe depends on the negotiations underway in which the EU, even as the world's largest and most-open trading bloc, is at a disadvantage partly due to the greater importance of the US for its exporters than vice versa (Figure 3). The EU is seeking to bolster trade co-operation with other trading partners. Figure 3. US market more important for EU exporters than vice versa %; the dot sizes represent the dollar value of exports to the US, 2024 US-EU Preliminary Agreement Probable Considering this, it appears likely that the US and EU will achieve some form of a framework agreement even if this involves average US levies of above 10%. A preliminary agreement by 1 August remains firmly possible. Nevertheless, given the seesawing US trade policies of the recent months, the White House might in an alternative scenario firstly impose the 30% levies, potentially temporarily, as leverage in negotiations before settling on an agreement after 1 August. Any preliminary agreement is likely to contain many caveats and carve-outs – with limited enforceability – serving only to avert further worst-case escalation and act as the starting point for further negotiations. The EU has several ways to retaliate in the scenario of a worsening trade war, from the newly introduced but yet-to-be-used anti-coercion mechanism to possible tariffs on American exports and the imposition of export controls, though Scope expects any such retaliation to remain gradual. Related material: Report: Scope's 2025 mid-year global economic outlook Presentation: Scope's 2025 mid-year economic and credit outlook For a look at all of today's economic events, check out our economic calendar. Dennis Shen is the Chair of the Macro Economic Council and Lead Global Economist of Scope Group. The rating agency's Macroeconomic Council brings together the company's credit opinions from multiple issuer classes: sovereign and public sector, financial institutions, corporates, structured finance and project finance. Arne Platteau, analyst in Credit Policy at Scope Ratings, contributed to this research. This article was originally posted on FX Empire More From FXEMPIRE: S&P 500 and Nasdaq 100 Analysis: Golden Cross, Golden Opportunity France: Multi-year Budget Plan Supports Fiscal Outlook but Great Uncertainty Remains Has the U.S. Dollar Found Support? Some Gains for the Aussie Dollar After the RBA Unexpectedly Holds Navigating China's Economic Challenges: A Q&A with Scope Ratings' Dennis Shen Buy Like Big Money: Carpenter Technology Soars
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6 days ago
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Germany: Successful Implementation of Infrastructure Investment Key to Growth, Fiscal Sustainability
Germany's intention to borrow up to EUR 850bn (20% of GDP) over the next five years to bolster defence (14% of GDP) and infrastructure (6%) is higher than the EUR 625bn Scope Ratings (Scope) had anticipated, mostly reflecting the government's increased ambition around defence spending. The government had paved the way for this additional borrowing with the debt brake reform of March 2025. Scope now projects that Germany's fiscal deficit will increase to around 4% of GDP over the medium term, from 2.8% in 2024 and 2.5% in 2023; and the public debt-to-GDP ratio will rise to around 74% by 2030, from 62.5% in 2024 (see Figures 1 and 2). Scope assumes a more gradual increase in borrowing relative to the government's fiscal plans, reflecting expected capacity constraints on rapidly-increasing defence and infrastructure spending, and the fact that the 2025 Budget has yet to be passed. After the fiscal plans were announced, the federal debt management agency raised its funding target for Q3 2025 to EUR 119bn, from EUR 100bn. While the expected increase in public deficits and the debt ratio is sizeable, Germany retains unique credit strengths, including its wealthy, large and diversified economy, robust fiscal policy framework and strong track record of fiscal discipline as well as its highly-competitive external sector. Borrowing Plans Imply a Fiscal Deficit of Around 4% of GDP and a Rising Public Debt Trajectory Figure 1: General government fiscal deficit, % of GDP Figure 2: General government gross debt, % of GDP Fiscal Space Will Shrink Without Pension and Labour Market Reform Despite the increase in borrowing, pressure to consolidate the federal core budget will increase over time. Growing expenditures on interest and social security, including on pensions and healthcare, will reduce fiscal flexibility. Projected revenue and expenditure trends imply a reduction in the headroom of non-mandatory spending to only 3% of total expenditure in 2035, from 24% in 2024, according to the think tank Dezernat Zukunft. Scope estimates an increase in net interest expenditure to 1.6% of GDP by 2030, from 1% of GDP in 2024, which, while remaining favourable compared to euro area peers, will reduce Germany's fiscal space. With limited fiscal headroom, German governments will likely become even more reliant on exemptions to the existing debt-brake rules or use special funds more frequently to address future challenges. However, both mechanisms come with significant political hurdles as these decisions require two-thirds parliamentary majorities. The current government lacks such a majority, and Scope believes it will be increasingly difficult also for future governments to meet that hurdle given the country's rising political fragmentation. To create fiscal flexibility over the medium term, structural reform efforts will need to focus on pensions, since top-ups to the pay-as-you-go pension system are projected to increase from EUR 93.1bn in 2025 to EUR 116.4bn (2.3% of GDP) in 2030. Tax revenues could be supported by increasing employment, including by increasing full-time employment among women and the elderly. Infrastructure Spending Vital to Closing Investment Gap and Boosting Growth The timely disbursement of the EUR 500bn infrastructure special fund through 2035 is critical for Germany's growth trajectory. To ensure additionality, investment levels in the core budget will need to be maintained. Planned investments target high-impact projects primarily in road, rail and digital infrastructure, which should address the most urgent needs to narrow the existing investment gap. If well executed, these investments could lift Germany's growth potential towards 1%. Before the special fund was announced, Scope had projected that potential growth would decline to around 0.7% by the end of this decade. Nevertheless, execution risks remain high, since many projects need to be completed in a short period of time. This could stretch planning and construction capacity but also lead to higher inflation. Investments also need to be supported by supply-side and labour-market reforms to raise the country's growth potential above 1% in line with the government's goal. Germany Aims to Meet Revised NATO Target by 2029 With Uncertain Growth Effects The government has significantly raised its ambitions for defence spending. Spending under the NATO definition is planned to increase from 2.1% in 2024 to 2.4% this year and then trend towards 3.5% by 2029, six years ahead of the agreed timeline (Figure 3). As the planned increase affects Germany the most among EU member states when viewed relative to central government revenues, the German government proactively reformed the debt brake to borrow in excess of 1% of GDP for defence spending. But the growth impact associated with higher defence spending is likely to be moderate, although that remains somewhat uncertain at this stage. The Kiel Institute estimates that fiscal multipliers for defence spending are only around 0.5x, depending on the extent to which equipment is procured domestically, and how quickly production capacity can be increased. Figure 3: Germany plans to meet revised NATO target of 3.5% of GDP by 2029 NATO defence spending, % of GDP For a look at all of today's economic events, check out our economic calendar. Julian Zimmermann is a Director in Sovereign and Public Sector and Financial Institutions ratings at Scope Ratings. This article was originally posted on FX Empire More From FXEMPIRE: Has the U.S. Dollar Found Support? Buy Like Big Money: Bentley Systems Lifting Off S&P 500 and Nasdaq 100 Analysis: Golden Cross, Golden Opportunity Germany: Successful Implementation of Infrastructure Investment Key to Growth, Fiscal Sustainability Jump On Potential Highflyers Like Sportradar Early Can Anything Stop Nvidia? The First $4 Trillion Company
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21-07-2025
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France: Multi-year Budget Plan Supports Fiscal Outlook but Great Uncertainty Remains
The French government affirmed its commitment to stabilise the public debt trajectory by 2029 through savings and supply-side reforms, following two years of budgetary slippage that resulted in a budget deficit of 5.8% of GDP in 2024, the highest in the euro area. Under Prime Minister François Bayrou's EUR 44bn of measures for the 2026 Budget (equivalent to around 1.5% of GDP), the government plans to keep public spending unchanged relative to 2025 levels, excluding military expenditure and interest payments. According to the plan, this will be achieved primarily through a nominal freeze on social benefits (including pensions) and income tax bands, alongside local government savings. If fully implemented – which is unlikely in the view of Scope Ratings (Scope) – the government's plan would reduce the budget deficit from an expected 5.4% in 2025 to 4.6% in 2026 and 2.8% in 2029. Instead, Scope expects a much more constrained and gradual fiscal consolidation path with the budget deficit still at 5% of GDP in 2027 and 4% in 2030 (Figure 1). This is because the impact of the savings plan on the headline deficit will be partially offset by the steady increase in net interest payments, from less than 4% of government revenue in 2024 to more than 6% by 2030. So, while the primary deficit is expected to return to its pre-Covid level of less than 1% of GDP by 2030, the headline deficit will remain elevated around 4% of GDP. Figure 1. Large primary deficits, rising interest payments weigh on the fiscal outlook % of GDP Savings Challenged by Economic Slowdown, Parliamentary Fragmentation and Rising Defence Expenditure The prime minister's measures to support domestic production include the elimination of two bank holidays, the reduction of red tape for businesses and greater labour market flexibility through upcoming negotiations with social partners on the unemployment benefits system. However, the introduction of ambitious structural reforms to support GDP growth, estimated at around 1% annually, appears unlikely in the near term. Modest economic momentum will weigh on the social acceptability of economic and budgetary reforms. Scope projects real GDP growth of 0.8% on average in 2025-26, after 1.1% in 2024, amid external headwinds including the United States's trade policies. In addition, the lack of a parliamentary majority since the 2022 legislative elections, the fragmented political landscape and heightened political polarisation following the 2024 dissolution of the National Assembly raise further uncertainties about the government's ability to implement its saving plans for 2026. Parliamentary discussions are expected to be challenged by difficult budgetary trade-offs to compensate for higher defence expenditures, projected to reach EUR 64bn in 2027 or about 2% of GDP. Discussions around the 2023 pension reform following this year's negotiations with social partners could also complicate the parliamentary debate. The need to strike a political compromise on the proposed economic and budgetary reforms will likely lead the government to water down some of its measures to appease political opposition, at the risk of missing next year's deficit targets. Conversely, relying on Article 49.3 of the Constitution to pass the 2026 Budget without a parliamentary vote will raise the risk of renewed political instability, following the collapse of the former government in December 2024. A successful no-confidence vote against the prime minister and/or early elections would undermine near-term fiscal consolidation. Political Hurdles Compound Uncertainties Around the Government's Saving Plan Upcoming elections – municipal elections in March 2026 and presidential elections in April-May 2027 – raise further uncertainties about budgetary efforts over the medium term. Reducing the deficit to below 3% of GDP by 2029 would require a savings plan of more than EUR 100bn, according to the French Court of Auditors. This is unlikely, given the uncertainty surrounding the policy agenda after the 2027 presidential elections. Figure 2. Large budget deficits, uncertain consolidation plan weigh on France's debt trajectory % of GDP Balancing the government's savings plan and the uncertainties around its implementation over the coming years, Scope believes general government debt to GDP will increase from about 113% in 2024 to 122% in 2030 (Figure 2). This would be one of the largest public debt increases among highly indebted developed countries, including Belgium, the United Kingdom and the United States. For a look at all of today's economic events, check out our economic calendar. Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings. Brian Marly, Senior Analyst in sovereign ratings at Scope, contributed to drafting this article. This article was originally posted on FX Empire More From FXEMPIRE: Navigating China's Economic Challenges: A Q&A with Scope Ratings' Dennis Shen Buy Like Big Money: Carpenter Technology Soars Buy Like Big Money: Bentley Systems Lifting Off SoFi Shares See Huge Bullish Signal, Could Rise More Identify Superstar Stocks Like DoorDash Before the Crowd Identify Superstar Stocks Like American Superconductor Early
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15-07-2025
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Michelin: Scope Ratings and Moody's both affirm Michelin's strong credit ratings
Clermont-Ferrand, July 15, 2025 COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS MICHELIN Scope Ratings and Moody's both affirm Michelin's strong credit ratings On July 11, 2025, Scope affirmed Michelin's (Compagnie Générale des Etablissements Michelin and its main financial subsidiaries) solicited Long-Term Issuer Default Rating (IDR) of 'A', with a Stable outlook. According to the agency, this 'reflects a solid business risk profile coupled with very strong and further improving credit metrics'. On July 9, 2025, Moody's (unsolicited rating) also published its Long-Term rating affirmation of 'A2' with a Stable outlook. The agency underlined that 'Michelin's attractive margins further reflect its unique position, (…) helped by its strong brand recognition and innovation capabilities'. Contact details Investor Relationsinvestor-relations@ Media Relations+33 (0) 1 45 66 22 Shareholders+33 (0) 4 73 32 23 05Muriel Elisabete Attachment 20250715_PR_Michelin Credit Rating Scope & Moodys
