Fitch Warns Germany’s ‘AAA’ Rating at Risk Amid Rising Military and Infrastructure Spending

Fitch Ratings has cautioned that Germany’s ‘AAA’ credit rating could face long-term pressure if its significant military and infrastructure expenditures are not balanced by fiscal discipline or sustained economic growth. In a recent report, the agency highlighted concerns over Germany’s fiscal trajectory as its governing coalition plans a €500-billion infrastructure fund and increased defense spending.

The agency estimates that Germany’s government spending will rise by €900 billion to €1 trillion over the next decade, pushing the fiscal deficit to 4-4.5% of GDP by 2027 and raising the debt-to-GDP ratio to 70%. While the spending could boost GDP growth by an average of 0.4 percentage points between 2025 and 2027, Fitch noted that economic challenges such as high energy costs, competition from China, and rising US tariffs could limit the effectiveness of these investments.

Germany’s departure from its historically conservative fiscal policy raises concerns about the sustainability of its top-tier credit rating. Fitch emphasized that the success of broader economic reforms and adjustments to Germany’s debt-brake rule by 2025 will be key indicators of fiscal stability. The report also warned that Germany’s increased borrowing could lead to higher bond yields across the eurozone, affecting financial conditions in Western Europe.