Standard & Poor’s Ratings Service said that while it expects European governments’ fiscal consolidation efforts to reduce net sovereign borrowing during 2012, it does not anticipate that gross medium- and long-term (MLT) commercial issuance will fall much this year (see European Sovereign Borrowing To Stabilize In 2012 At Close To All-Time High Levels).

Sovereign gross debt issuance will, under our projections, remain only slightly below 2011 levels, equivalent to 1.5x pre-crisis amounts. Sovereign refinancing needs in Europe continue to rise, leading the overall stock levels of European sovereign MLT commercial debt to reach an all-time high.

As in 2011, net borrowing is likely to continue to fall. Nevertheless, our forecasts on net sovereign borrowing requirements for 2012 are subject to considerable uncertainty. Were GDP growth to be lower than we currently anticipate, the resulting fiscal slippage could push up public sector borrowing needs. Meanwhile, the one-off costs associated with financial sector recapitalization programs could also raise funding needs materially.

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