ING Investment Management

Rarely has the relationship of investors with sovereign debt been more ambivalent. The Western media tell us that we face a debt crisis, with debt-to- GDP ratios approaching 100%

Many pundits seem to be convinced that lower public sector creditworthiness and higher inflation are inevitable parts of our economic future

If Greece is allowed to default now, the risk of a confidence crisis and contagion is substantial. The debt of other weak eurozone countries may fall victim to speculators and the market for credit default swaps could experience difficulties again

The fall-out from the Lehman default in 2008 should remind everybody that a negative feedback mechanism into other parts of the financial system and the real economy can create a negative-sum game for all parties involved.

Would it be conceivable that top-quality corporates can take over the baton of being the “risk free” investment of choice? Nestle default protection is cheaper than German sovereign protection and Wal-Mart default protection is cheaper than United States sovereign protection