June 13 (Bloomberg) -- German Finance Minister Peer Steinbrueck signaled concern that some European countries may have their sovereign credit ratings cut as tax revenue shrinks and borrowing costs rise.

“What’s going to happen to our friends in the European Union that are not getting the same conditions” as Germany when borrowing money from capital markets, Steinbrueck said in Lecce, Italy, where he’s meeting counterparts from the Group of Eight nations. “I’m hinting at this now so that nobody asks in half a year or so whether I was blind and whether that wasn’t an issue in international discussions.”

The warning follows the widening of the yield spread earlier this week between 10-year Irish government bonds and equivalent German securities after Standard & Poor’s lowered Ireland’s credit rating for the second time in 2009.

Nations around the world are borrowing record amounts to finance bank-rescue plans and stimulus packages to fight the worst economic recession since World War II. That’s partly responsible for pushing down the price of government bonds.

Outside Capital

President Barack Obama may raise a record $3.25 trillion in the fiscal year ending Sept. 30, almost four times the $892 billion in 2008, according to Goldman Sachs Group Inc. Germany faces gross borrowing of 330 billion euros ($463 billion) next year, Steinbrueck said.

Companies relying on outside capital may struggle to raise money as the surge in government borrowing pushes yields on other bonds higher, Steinbrueck said. He said he’s worried about a possible “overextension of capital markets.” Government bond yields are often used as benchmarks for corporate and mortgage borrowing costs.

Steinbrueck signaled disappointment that the G-8 failed to choose stronger language today on “exit strategies” to the financial and economic crisis, such as scaling back government borrowing and withdrawing monetary policy stimulus.

“More was not to be expected” on exit strategies, Steinbrueck told reporters after the meeting when asked whether he was happy with the outcome. “At the moment we’re still occupying ourselves with crisis management, but the question of fighting inflationary developments in a timely fashion plays an important role.”

To contact the reporter on this story: Rainer Buergin in Lecce at rbuergin1@bloomberg.net

Last Updated: June 13, 2009 08:51 EDT