Moody’s downgrades outlook for federal states

D.he rating agency Moody’s downgraded the outlook for the federal states to “negative”. This means that the credit ratings are likely to be lowered rather than upgraded. The credit checkers justify their negative outlook with the lower development of tax revenues and the higher expenditure to support the economy in the corona pandemic.

Since the economic growth momentum will be weaker than expected before the Corona crisis, tax revenue this year will not quite reach the level of 2019, Moody’s estimates. In addition, there would be financial burdens for the countries from the programs to stimulate the regional economy. “The nationwide suspension of the debt brake will enable the countries to further increase their debt levels,” Tamas Fuszenecker, an analyst at Moody’s, was quoted as saying.

High financial requirements

The financial requirement to cover deficits is likely to decline from the expected record of 41 billion euros in 2020, but will remain high at around 24 billion euros in 2021 and 21 billion euros in 2022. According to Moody’s, the borrowing, including due titles, is expected to amount to 61 billion and 57 billion euros respectively over the next two years. Last year the federal states raised 74 billion euros.

You are currently benefiting from the historically low interest rates on the bond market and also from the purchases made by the European Central Bank (ECB). This makes it easier to refinance securities that are due.


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