Fitch's 'Inside Credit': Europe's Complex Fiscal Rules and Long-term Impact of Low Oil Prices

This week 'Inside Credit,' Fitch Ratings looks at the eurozone's complex fiscal rules, and the impact that sustained low oil prices could have across a disparate set of issuers in multiple sectors.

The eurozone's fiscal rules have become more accommodative, complex and less transparent. In the first installment of Fitch's new monthly commentary series, Global Perspectives, James McCormack, Global Head of Sovereign Ratings said that Europe needs simpler fiscal rules.

'While the most urgent policy priority in the eurozone is addressing disinflationary trends, an equally important objective is the restoration of public finances,' said McCormack. 'As for the complexity of the Eurozone's fiscal rules and the consequent lack of transparency, the most egregious shortcoming is that it is impossible to assess compliance in real time.'

This week's edition also features Fitch's study on the sensitivity to prolonged oil price pressure across the sovereign, corporate and U.S. municipal sectors. The rapid fall in the price of crude oil, from over $100 per barrel of West Texas Intermediate (WTI) last summer to less than $50/bbl has exposed numerous oil-dependent issuers to heightened risks as a result of significant declines in revenues and cash flow.

'Our goal was to put the financial impact of the oil price decline in perspective for a wide range of issuers that could be affected,' said Robert Grossman, Managing Director of Macro Credit Research.