Thijs Knaap on BNR on the creditworthiness of Italy and the US

Published on: 15 November 2023

Rating agency Moody's will decide next Friday whether Italian government bonds will slide further on the creditworthiness scale. If that happens, an investment in Italy formally falls into the category of 'speculative'. But as long as the European Central Bank (ECB) maintains its 'To Protect Italy' rules, there is no reason to worry, says APG's chief economist Thijs Knaap on the investor panel on BNR Nieuwsradio.

 

Investing in Italian government bonds seems very attractive, because due to the higher risk the Italian government now has to pay 1.84 percent more for a loan than the German government. But how long will this continue to go well? Is there a threat of a scenario like that of Greece during the debt crisis? "Investors know that the ECB stands with Italy when the need arises. But there is a risk. The ECB may have to change course at some point. And then there will come a time when Italy's debts and interest charges are so high that Italy can no longer meet its payment obligations," warns Knaap.


The US credit rating is also under pressure once again. The rating agencies repeatedly threaten to deprive the US of its AAA rating. Last Friday, credit rating agency Moody's put America on a ‘negative outlook’, and this Friday it is possible that the US government will shut down – for the umpteenth time – because the budget is not ready in time to pay the salaries of civil servants. The problem is that American politics is divided. But the US can easily get out of trouble by raising taxes and spending less. 

 

Thijs Knaap also discussed Green bonds and the payment company Adyen, among others, during the investor panel on BNR Nieuwsradio. Listen to the (Dutch) broadcast here.