No immediate risk to creditworthiness, but beware of the deficit.

Despite rising public debt, the Bundesbank does not believe Germany’s creditworthiness is at risk. “Germany continues to enjoy a high creditworthiness and, despite a rising debt-to-GDP ratio, remains in calm waters by international standards,” it wrote. Michael Theurer, member of the institute’s board of directors, in an article in the daily newspaper “Handelsblatt”.

Theurer, however, warned of the long-term consequences of high deficits, emphasizing the need for reliable fiscal consolidation. He also emphasized Germany’s role as an “anchor of stability” for the eurozone. According to the Bundesbank, a particular risk to the stability of the eurozone is the close interdependence between governments and banks, which emerged during the sovereign debt crisis. Doubts about government solvency can undermine the solidity of banks, while banking crises require public bailouts that burden balance sheets. Finally, Theurer called for a review of the regulations favoring government bonds, which are exempt from capital requirements and exposure limits, proposing greater separation between governments and financial institutions to strengthen long-term stability.

No immediate risk to creditworthiness, but beware of the deficit.

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