S&P: The impact of rising interest rates has not yet been felt in Europe

The credit rating agency said in a statement that credit conditions will tighten further as central banks try to contain inflation and ensure price stability.

In the statement, it was stated that the real impact of rising interest rates has not yet been felt across Europe.

Pointing out that inflation is not expected to be brought under control and price stability is not expected to be achieved in the euro area before 2025, the statement noted that with more restrictive interest rates, banks will be more risk averse, funding costs will rise and the focus of investors and lenders on credit quality will increase.

In the statement, it was stated that the economic cycle has also weakened and this will put more pressure on companies and households, but the Eurozone is not expected to experience a deep recession.

Emphasising that economic growth in the Eurozone remains fragile despite its recent resilience, the statement said that with rising interest rates putting more and more pressure on the housing market and consumer demand, the wind created by low unemployment, ongoing financial support and the post-Covid-19 recovery will probably diminish.

In the statement, it was pointed out that the war in Ukraine has entered a new and potentially dangerous phase, and it was noted that sensitivities about the course of the war in Russia have increased further after the recent rebellion of the Wagner group, as Ukraine tries to go on the offensive to regain its territory.

Given the uncertainty and unpredictable nature of the decision-making process in Russia, the macro credit impact in Western Europe has so far proved to be far less damaging than feared last year, but risks remain high, S&P said.