Germany’s creditworthiness remains robust despite increasing national debt, according to a senior Bundesbank official. Michael Theurer, a member of the Bundesbank’s executive board, wrote in a commentary published by the “Handelsblatt” that Germany continues to enjoy a strong credit rating and, in comparative terms, remains in a stable financial position even with a rising debt-to-GDP ratio.
However, Theurer cautioned about the long-term implications of increasing interest burdens on the federal budget, stressing the necessity of reliably reducing current deficits. He emphasized Germany’s important role as an anchor within the Eurozone.
Concerns are particularly focused on the interconnectedness of states and banks throughout the Eurozone. This interdependence demonstrated a risk to stability during both the financial crisis and the sovereign debt crisis. Doubts surrounding the solvency of individual nations could negatively affect the creditworthiness of banks, while conversely, banking crises could necessitate state-led rescue operations and burden public finances.
A key driver of this reliance, Theurer explained, is the regulatory treatment of sovereign bonds, which are not required to be backed by banks with capital nor counted against large exposure limits. He advocates for a greater separation of states and banks to ensure lasting financial stability within the Eurozone.