Concern is growing within the German government and among economists regarding a potential downgrade of Germany’s credit rating. A high-ranking government official told the newspaper Handelsblatt that if debt levels remain high without a corresponding boost in growth, the rating agencies could question Germany’s current Triple-A rating. Another government official echoed this view, stating, while not happening immediately, they could come under pressure in the coming years if the current trend continues.
Though the three leading rating agencies-S&P Global, Moody’s, and Fitch-confirmed Germany’s top credit quality this spring, experts note that Germany is no longer viewed as positively as it was several years ago. Malgorzata Wegner, an expert in country ratings at Fitch, told Handelsblatt that the pressure on the rating has increased. The primary reasons cited for this shift include rising national debt, weak medium-term growth, and ongoing uncertainty regarding the political course after the current legislative period concludes.
Economists are also sounding alarms. Moritz Krämer, who previously worked for S&P Global Ratings, suggested it would not surprise him if one of the rating agencies announced a negative outlook in the near future. Jörg Rocholl, President of the ESMT School of Economics, warned that if Germany fails to achieve growth, its AAA rating would be at risk in the medium term. Moreover, Thiess Büttner, chairman of the scientific advisory board of the Stability Council, asserted that a rating downgrade would ultimately be inevitable if effective reforms to the debt brake are not implemented and the increase in the overall government debt ratio is expected to continue in the medium term.
Furthermore, internal data from the Federal Ministry of Finance, reported by Handelsblatt, indicates that in the medium term, Germany’s interest costs could rise by 17.3 billion euros annually should interest rates increase by one percentage point.
