Default rate in EU to decelerate further, says S&P

Default rates in the European Union (EU) are set to decline further, following a dramatic decrease last year, said rating agency Standard & Poor’s (S&P).

Of the 126 defaults that S&P recorded globally in 2003, only eight occurred in the EU, affecting rated debt outstanding worth US$14.3 billion. In 2002 there were 27 defaults in the EU area. The rating agency added, however, that the deceleration in the EU default rate coincided with an increase in lower-grade issuance last year, suggesting the need for “caution down the road”.

“The slowdown in the EU mirrored parallel developments in global defaults, even though volatility in European default rates is generally higher owing to the smaller universe of defaults and rated credits,” said Diane Vazza, head of S&P’s global fixed-income research group.

The default of Parmalat in the fourth quarter accounted for half of the total debt outstanding affected by European defaults in 2003, said S&P.