Another European problem: public pensions
Public pension liabilities have emerged as an issue to further cloud the outlook for major European economies, according to a new analysis released this week by the EDHEC-Risk Institute.
The analysis of pension commitments in the major European Union economies suggests that those countries which have appeared "virtuous" with respect to their public finances, may not be so virtuous when their pension exposures are taken into account.
The EDHEC-Risk Institute analysis said that when public pension liabilities were taken into account, the outcome was "substantially different to those habitually taken into account by ratings agencies and investors".
"As such, countries with virtuous public finances in the Maastricht sense, such as, for example, Sweden, Luxembourg or Denmark, are much less virtuous if their public pension commitments are taken into account, while the situation of countries such as Spain, Italy or even Portugal is relatively better," it said.
The EDHEC-Risk Institute analysis said that, because of this, investors had to be more vigilant on pensions risk when evaluating the solvency of sovereign issuers.
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