S&P: European Atomic Energy Community Ratings Affirmed At 'AA/A-1+' Reflecting Rating On The EU; Outlook Stable
Under our criteria, we assess EURATOM as a core entity of the supranational entity, the EU, (see “Group Rating Methodology,” published Nov. 19, 2013 on RatingsDirect, and section C4 of "Multilateral Lending Institutions And Other Supranational Institutions Ratings Methodology," published Nov. 26, 2012). Theaffirmation of EURATOM therefore reflects our view of the creditworthiness of the EU (see "Long - Term Rating On Supranational Institution The European UnionLowered To 'AA' On Brexit Referendum; Outlook Stable," published June 30, 2016).
EURATOM, like the EU, is a legally autonomous entity with its own borrowing powers. EU and EURATOM borrowings take place under a joint €80 billion euro medium-term note program. EURATOM's members comprise the 28 EU member states. According to Article 20 of the Merger Treaty (abrogated by the Amsterdam Treaty in 1997), the EU and EURATOM share a common budget, which includes the EU's budget and EURATOM's operating, research, and investment budget. By law, the common budget is required to be in balance.
EURATOM was founded as a supranational entity in 1957 at the same time as the EU. Its purpose is to help create the conditions necessary for the establishment and growth of peaceful nuclear industries within EU member states. It also extends financing in certain Central and Eastern European countries to improve the safety and efficiency of nuclear power stations. These countries included Romania and Bulgaria before their accession to the EUin 2007. Ukraine is the only non-EU borrower.
Like the EU, EURATOM's debt-service capability benefits from multiple layers of support. Debt-service payments may be made out of the common budget if loanrecipients default on their obligations. If budget revenues are insufficient, EURATOM is entitled, through the budgetary mechanism, to draw funds directly from member states until its debt-service obligations are fully met. To date, EURATOM's debt has always been serviced through borrower repayments.
The outlook is stable. As long as we view EURATOM as a core entity of the EU, our rating and outlook on EURATOM should match our rating and outlook on the EU. Our view of EURATOM’s group status as core would change if, for example, the Amsterdam Treaty were amended to reverse the integration of the EU and EURATOM budgets and borrowing programs.