Germany’s creditworthiness remains robust despite rising national debt, according to a recent assessment by the Bundesbank. In a contribution to the “Handelsblatt”, a member of the Bundesbank’s executive board, Michael Theurer, stated that Germany continues to enjoy a high credit rating and, comparatively, remains in a stable position internationally even with an increasing debt ratio.
However, Theurer cautioned against the long-term implications of growing interest burdens on the federal budget, stressing the importance of reliably reducing current deficits. Germany, he emphasized, serves as a crucial anchor within the Eurozone.
Of particular concern to the Bundesbank is the interconnectedness of states and banks within the Eurozone. This relationship has previously proven to be a risk to stability, notably during the financial and sovereign debt crises. Doubts regarding the solvency of individual states could undermine the creditworthiness of banks, while banking crises, in turn, often necessitate state-backed rescue measures, thereby straining public finances.
A key driver of this interdependence, Theurer explained, is the regulatory preference given to sovereign bonds, which are not required to be backed by banks with equity capital nor counted towards large exposure limits. He therefore advocates for greater separation between states and banks, arguing that this is essential to ensure the long-term financial stability of the Eurozone.
