Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Land of Hesse (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer rating: S-1+/Stable) on 14 April 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

The AAA/Stable rating is supported by the highly integrated institutional framework for the German Länder, which includes a robust revenue equalisation system, the federal solidarity principle, and the federal government’s primary role in absorbing shocks—demonstrated during the Covid-19 pandemic and the Ukraine-Russia crisis. These elements enhance the Länder's capacity to manage economic and financial disruptions. Recent amendments to Germany’s debt brake framework allow all Länder, collectively, to run a structural deficit of up to 0.35% of national GDP, and to draw on EUR 100bn in federally borrowed infrastructure funds (part of a broader EUR 500bn initiative). Scope expects that the additional borrowing capacity may lead to higher debt levels across the Länder. However, higher revenues under the baseline scenario, supported by a strengthening economy and the Länder's continued fiscal commitment, should stabilise the debt burden.

Hesse’s AAA/Stable rating further reflects the following individual credit strengths: i) sound budgetary management with recurring operating surpluses and a strong commitment to the Land’s debt brake; ii) conservative debt and liquidity management, with excellent market access and a favourable debt profile; iii) low contingent liabilities with a well-equipped pension fund for its civil servants; and iv) above-average revenue flexibility.

The main rating challenge is limited expenditure flexibility, coupled with spending pressures which weigh on budgetary margins over the forecast horizon.

The Stable Outlook represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced. The ratings could be downgraded if: i) the German sovereign rating was downgraded; ii) changes to the institutional framework were to result in notably weaker support; and/or iii) the individual credit profile deteriorated significantly and structurally.

For the latest Rating Report, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sub-Sovereigns Rating Methodology, 11 October 2024) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Eiko Sievert, Senior Director

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