Germany's Unsolicited 'AAA/A-1+' Ratings Affirmed; Off Watch Neg, Outlook Stable |
| Publication date: 13-Jan-2012 16:40:09 EST |
- We are affirming the unsolicited 'AAA' long-term and 'A-1+' short-term ratings on the Federal Republic of Germany.
- The outlook on the long-term rating is stable.
FRANKFURT (Standard & Poor's) Jan. 13, 2012--Standard & Poor's Ratings Services today affirmed its unsolicited 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the Federal Republic of Germany. The outlook on the long-term rating is stable. Our transfer and convertibility (T&C) assessment for Germany, as for all European Economic and Monetary Union (eurozone) members, is 'AAA', reflecting Standard & Poor's view that the likelihood of the European Central Bank restricting nonsovereign access to foreign currency needed for debt service is extremely low. This reflects the full and open access to foreign currency that holders of euro currently enjoy and which we expect to remain the case in the foreseeable future. The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems. In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those eurozone sovereigns subjected to heightened market pressures. We also believe that the agreement is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU's core and the so-called "periphery". As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers' rising concerns about job security and disposable incomes, eroding national tax revenues. Accordingly, in line with our published sovereign criteria, we have adjusted downward the political score we assign to the Federal Republic of Germany (see "Sovereign Government Rating Methodology And Assumptions," published on June 30, 2011). This is a reflection of our view that the effectiveness, stability, and predictability of European policymaking and political institutions (with which Germany is closely integrated) have not been as strong as we believe are called for by the severity of a broadening and deepening financial crisis in the eurozone. Despite our downward revision of the political score, we are affirming Germany's sovereign ratings. The ratings reflect our view of Germany's modern, highly diversified, and competitive economy, and the government's track record of prudent fiscal policies and expenditure discipline. Furthermore, we believe the German economy has demonstrated its ability to absorb large economic and financial shocks, including the reunification of West Germany with East Germany in the 1990s and the global recession in 2009. These strengths remain and continue to offset our view of a weaker-than-previously-anticipated European political environment. The stable outlook on our long-term rating on Germany reflects our expectation that its public finances will continue to withstand potential financial and economic shocks and that consensus in favor of prudent budgetary policies will remain, thereby containing the net general government debt ratio. We could lower the unsolicited long-term sovereign credit rating on Germany if, contrary to our expectations, the net general government debt ratio were to reach 100% of GDP, from just under 80% of GDP currently. This could occur, for example, if consistently larger-than-currently-anticipated deficits surpass 3% of GDP, which is well above the constitutional limit. We would then likely change the fiscal and debt scores in line with our criteria. A currently unexpected surge in contingent liabilities from the domestic financial sector could also exacerbate and accelerate downward ratings pressure. We currently do not expect these scenarios to materialize over the outlook horizon (up to 24 months) and we therefore assign a stable outlook to Germany. RELATED CRITERIA AND RESEARCH All articles listed below are available on RatingsDirect on the Global Credit Portal.
- Sovereign Government Rating Methodology And Assumptions, June 30, 2011
- Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009
- Standard & Poor's Puts Ratings On Eurozone Sovereigns On CreditWatch With Negative Implications, Dec. 5, 2011
- Trade Imbalances In The Eurozone Distort Growth For Both Creditors And Debtors, Says Report, Dec. 1, 2011
- Standard & Poor's RPM Measures The Eurozone's Great Rebalancing Act, Nov. 21, 2011
- Who Will Solve The Debt Crisis?, Nov. 10, 2011
TELECONFERENCE INFORMATION Standard & Poor's will hold a teleconference on Saturday Jan. 14, 2012 at 3:00 PM UK time. The teleconference can be accessed live or via replay and by phone or audio internet streaming The call will begin promptly at 3:00 p.m. TELECONFERENCE DETAILS Passcode: 2705831 For security reasons, the passcode will be required to join the call. DIAL IN NUMBERS: Country Toll Numbers Freephone/Toll Free Number AUSTRIA 43-1-92-80-003 0800-677-861 BELGIUM 32-1-150-0312 0800-4-9471 DENMARK 45-7014-0239 8088-2100 ESTONIA 800-011-1121 FINLAND 106-33-149 0800-1-12771 FRANCE 33-1-70-75-25-35 080-563-9909 GERMANY 49-69-2222-3198 0800-101-6627 GREECE 30-80-1-100-0674 00800-12-6609 IRELAND 353-1-247-5274 1800-992-870 ITALY 39-02-3601-0953 800-985-849 LUXEMBOURG 352-27-000-1351 8002-9058 NETHERLANDS 31-20-718-8530 0800-023-4392 PORTUGAL 8008-12439 SLOVAK REPUBLIC 421-2-322-422-16 SPAIN 34-91-414-40-78 800-098-194 UNITED KINGDOM 44-20-7950-6551 0800-279-3590 USA 1-210-795-1143 866-297-1588 TELECONFERENCE REPLAY INFORMATION: Call notes: This call is to be recorded for Instant Replay purposes UK TOLL #: +44-20-7108-6279 UK TOLL FREE #: 0800-376-9027 The instant replay will start at: Jan. 14, 2012 5:30pm UKT The instant replay will end at: Feb-14-2012 11:59pm UKT Passcode for replay: 7498 Restrictions may exist when accessing freephone/toll free numbers using a mobile telephone. AUDIO STREAMING AND AUDIO REPLAY INFORMATION: To join the event: URL: https://e-meetings.verizonbusiness.com Conference number: 1297498 Passcode: 2705831 To access the Audio Replay of this call, all parties can: 1. Go to the URL listed above. 2. Choose Audio Streaming under Join Events. 3. Enter the conference number and passcode. (Note that if this is a recurring event, multiple dates may be listed.) Replays are available for 30 days after the live event.
This unsolicited rating(s) was initiated by Standard & Poor's. It may be based solely on publicly available information and may or may not involve the participation of the issuer. Standard & Poor's has used information from sources believed to be reliable based on standards established in our Credit Ratings Information and Data Policy but does not guarantee the accuracy, adequacy, or completeness of any information used.
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
| Primary Credit Analyst: | Moritz Kraemer, Frankfurt (49) 69-33-99-9249; moritz_kraemer@standardandpoors.com |
| Secondary Contact: | Frank Gill, London (44) 20-7176-7129; frank_gill@standardandpoors.com |
| Additional Contact: | Sovereign Ratings; SovereignLondon@standardandpoors.com |
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