Credit quality for local and regional governments (LRGs) outside the U.S. remains largely stable. A negative rating outlook bias persists and suggests ratings volatility over the next few years. Public-sector spending could accelerate, with different implications for budgets: In countries where national restrictions on regional deficits and debt levels are either loose or don’t exist, budgetary performance remains weak, leading to relatively fast debt accumulation--for example Australia, Belgium, and Canada; In some European countries where regional governments must comply with national restrictions, spending pressure is transferred to lower tiers of government and public-sector enterprises. This deters economic recovery and will prevent material improvement in financial indicators when economic growth resumes. We anticipate our rated universe of LRGs will keep accumulating debt, directly and via public enterprises.