S&P Sees Significant Rebound in German Business Investment For 2006

Germany’s corporate sector is likely to generate a significant rebound in business investment in 2006 after regaining its cost competitiveness this year, according to an annual review of German economic and credit trends by Standard & Poor’s Ratings Services. Structural reforms and a credible strategy to contain debt are still needed if Germany is to maintain its AAA sovereign credit rating. “After six years in the European Monetary Union, Germany has regained its cost competitiveness, as evidenced by the remarkable export performance recorded by German companies in contrast with their French and Italian competitors,” said Standard & Poor’s chief European economist Jean-Michel Six. Standard & Poor’s expects German exports to grow by 5.5 per cent in real terms in 2005 and 6.5 per cent in 2006, compared with 3.2 per cent and 4.3 per cent in France, and 0 per cent and 3.5 per cent in Italy. But despite this improved export performance, Germany still lags its AAA-rated peers in terms of fiscal and economic performance and is only recovering from three years of stagnation, held back by structural obstacles to employment growth. Standard & Poor’s expects to see a rise in the number of German entities seeking credit ratings in 2006, particularly in the corporate, structured finance, and public finance sectors.


Related reading