Fitch affirms AAA rating for Germany assuming strong growth and no more contributions to eurozone crisis mechanisms

Ratings agency Fitch has affirmed Germany’s rating as “AAA” with a stable outlook (release).

Fitch said the affirmation reflects a number of factors including:

The government has overachieved on some key fiscal targets, beating its target for headline fiscal balance for the second consecutive year in 2012 with a surplus of 0.2 per cent of GDP.

Fitch believes the debt/GDP ratio has peaked, with the economy growing, the budget position favourable and nominal interest rates low. While debt at 81.9 per cent of GDP in 2012 was high compared with the “AAA” median of 49 per cent, it is still within the range consistent with this rating.

Germany is a significant net external creditor with one of the strongest net international investment position in the world and a large current account surplus.

Fitch added that risks from contingent liabilities from the Eurozone crisis have eased, reflecting a recent strengthening in governance measures. However, it stressed it did not believe the Eurozone ciris was over, saying there will need to be further country’level fiscal and structural adjustment and greater progress towards a banking union.

The agency has based its “AAA” rating on the assumption the German economy will grow by 1.5 per cent by 2014 from 0.4 per cent in 2013. Critically, it also assumes no further contribution from Germany to eurozone crisis mechanisms.

German elections are set for 22 September 2013. Fitch assumes policy will remain broadly similar at both domestic and European levels.