German local and regional governments (LRGs) face deteriorating macroeconomic and fiscal environments, which combined with debt regulations that permit only limited deficits could leave LRGs’ capital expenditure growth at below inflation. S&P Global Ratings forecasts German states and municipalities will borrow €126 billion in 2024. About 45% of that will likely be funded with bonds, which are almost exclusively the preserve of the states, suggesting a material resurgence in annual bond issuance following lows in 2022. The effect of recently higher yields on LRG’s interest costs are mitigated by their mostly fixed rate funding and balanced maturities, though significant aggregate debt burdens mean increasing yields are materially relevant to overall budgets. German LRGs’ revenue and expenditure structure exposes them to certain uncontrollable risks, including inflation of major costs and subdued economic growth that can weigh on shared taxes.