‘ReArm Europe’ leaves credit markets cold

The reaction of credit markets to the EU armament program has so far been rather muted. Rating agencies such as Moody's and Scope expressed concern for countries with ‘weaker budgets’. However, even French and Italian 10-year benchmark spreads remained at around 70 and just under 120 basis points, respectively. The program, with a spending framework of over EUR 800bn, promises a considerable additional volume of issues in the primary market. According to estimates by the European Defence Agency, the EU's defence spending in 2024 was still EUR 326bn.