S&P affirms Germany's top rating, outlook stable

(Reuters) - Standard & Poor's on Thursday affirmed Germany's top AAA credit rating and said its outlook remained stable thanks to the ability of Europe's largest economy to withstand potential financial and economic shocks.

S&P said the ratings reflected Germany's modern, highly diversified, and competitive economy, its strong external creditor position, and its record of prudent fiscal policies and expenditure discipline.

"We are further of the view that the German economy has demonstrated its ability to absorb large economic and financial shocks, such as the reunification of West Germany with East Germany in the 1990s and the global recession in 2009," S&P said in a statement.

Last month, rival credit ratings agency Moody's Investors Service cut its outlook for Germany as well as the Netherlands and Luxembourg to negative from stable as the fallout from Europe's debt crisis cast a shadow over the euro zone's top-rated countries.

Germany's economy was likely to slow significantly, S&P said, forecasting GDP growth of around 1 percent in 2012 and 2013 from an average of more than 3 percent for the past two years.

Data on Wednesday showed Germany's manufacturing sector contracted in July at its fastest pace in more than three years as companies received fewer new orders and output flagged, suggesting the euro zone crisis and global slowdown are hurting its export-focused economy.

"After posting balanced general government budgets before the crisis, Germany's public finances have worsened as a result of the deep 2009 recession.

"However, Germany, in our view, has contained the deterioration better than several of its 'AAA' rated peers, whose steep deficit increases have been more pronounced and may persist for much longer," S&P said, expecting a government deficit of close to 1 percent of GDP in 2012.

S&P said its rating could be lowered if the net general government debt ratio reached 100 percent of GDP from just under 80 percent currently.

"This could occur, for example, if consistently larger-than-anticipated deficits surpass 3 percent of GDP, which is well above the constitutional limit," S&P said.

(Reporting by Lincoln Feast in Sydney; Editing by Edwina Gibbs)

Source: http://news.yahoo.com/p-affirms-germanys-top-rating-outlook-stable-013824788--business.html

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