Slovakia’s government is continuing efforts to reduce the budget deficit despite sluggish growth but the risk of missing targets amid worsening fiscal fatigue is rising. Use of temporary measures raises doubts over the durability of the adjustments.

Poland’s structurally embedded spending increases and wider budget deficits highlight its fiscal vulnerabilities as institutional gridlock hampers any durable adjustment. Yet resilient growth and EU financial support are containing debt-servicing costs.

Corporate NPL ratios remain high, particularly in Germany, France, Austria and Belgium, while geopolitical risks and trade tensions have rendered the economic outlook uncertain. Our baseline of a moderate deterioration in asset quality remains intact.

The latest government shutdown in the United States occurred as a result of policy disagreements between Republicans and Democrats on issues such as healthcare, but it reflects the country’s deepening political polarisation.

Following MPS’s acquisition of Mediobanca and BPER’s takeover of BPSO, we expect Banco BPM to play a more active role in Italy’s banking consolidation wave, which is being driven by financial as well as strategic and political factors.

As Russia’s war in Ukraine war drags on with no end in sight, the challenges for Ukraine’s debt sustainability and finances are mounting. Addressing them requires the use of frozen Russian reserves. Deeper debt restructuring should also be considered.

Germany’s ramp-up of infrastructure and defence spending will likely be more gradual than planned, posing risks to an already fragile growth outlook, particularly if additional investments and associated private-sector co-investment fail to materialise.

The decision to keep rates on hold last week confirms that the ECB remains in wait-and-see mode. With inflation around 2%, there is little justification for a cut next month. The economy is relatively resilient and risks to inflation are balanced.

Scope Ratings has published an update to its Financial Institutions Rating Methodology. No outstanding ratings are impacted.

The Fed’s expected 25bp rate cut on Wednesday appears premature given the latest increase in headline inflation to 2.9%, an economy still expanding at around 2%, the uncertain effects of higher tariffs and only modest signs of labour market softening.