The writer is chief economist at German bank LBBW and former chief ratings officer at S&P
Germany has not yet been relegated by capital markets in sovereign rankings. Despite the country’s economic weakness the Bund is still the undisputed euro debt benchmark. Its AAA-rating has a stable outlook with all major rating agencies. But this will not last for ever.
The simplistic view still shared by many German politicians is that high creditworthiness is a direct function of low debt. It is not. In fact, the public debt burden of highly rated advanced economies is substantially higher than that of lower-rated emerging markets. Other factors such as growth, productivity and innovative capacity play a critical role, too. And this is where Germany increasingly falls short.