Moritz Kraemer

Die Entwicklungsländer stoßen immer mehr Treibhausgase aus. Doch es gibt einen Weg, wie die reichen Länder ihnen helfen können - und davon selbst profitieren.

Global financial institutions must reshape fiscal policy to balance debt relief with climate resilience.

Falls Donald Trump die Wahl gewinnt, wird er radikaler handeln als je zuvor, warnt LBBW-Chefvolkswirt Moritz Kraemer. Es drohen Verluste für deutsche Unternehmen und eine Finanzpanik.

Die EZB möchte zur Normalität zurückkehren – doch es fehlt ihr der Mut, meint Moritz Kraemer. Für Marktteilnehmer seien weder Vertrauen noch Planbarkeit in Sicht. Dabei gibt es realistische Lösungen.

A blog on the F2C2 proposal to raise funds on the capital market to finance climate mitigation investments of low- and lower middle income countries.

Es drängt sich der Eindruck auf, dass die Agenturen mit zweierlei Maß messen. Die Schüchternheit gegenüber den reichen Volkswirtschaften grenzt mittlerweile an Arbeitsverweigerung. Ein Gastbeitrag.

Ein dogmatisches Beharren auf der Schuldenbremse angesichts massiver Investitionsbedürfnisse macht ein deutsches Downgrade wahrscheinlicher. Davon ist Moritz Kraemer überzeugt. Er plädiert für eine Reform der Bremse.

Rating agencies are convenient scapegoats. But the data shows no negative bias against African sovereigns. In fact, if anything, the default statistics indicate that sovereign ratings on the continent have been too high.

Credit enhancements for debt issued by Kyiv would allow funds to be raised more quickly and on a larger scale.

Moritz Kraemer hat für S&P viele Jahre die Bonität einzelner Länder bewertet. Unter ihm verloren zum Beispiel die USA erstmals ihr AAA-Rating – und er glaubt, das könnte bald auch Deutschland drohen

Enthusiasm for “greening the financial system” is welcome, but a fundamental challenge remains: financial decision makers lack the necessary information. It is not enough to know that climate change is bad. Markets need credible, digestible information on how climate change translates into material risks. To bridge the gap between climate science and real-world financial indicators, we simulate the effect of climate change on sovereign credit ratings for 109 countries, creating the world’s… Mehr anzeigen

Enthusiasm for “greening the financial system” is welcome, but a fundamental challenge remains: financial decision makers lack the necessary information. It is not enough to know that climate change is bad. Markets need credible, digestible information on how climate change translates into material risks. To bridge the gap between climate science and real-world financial indicators, we simulate the effect of climate change on sovereign credit ratings for 109 countries, creating the world’s first climate-adjusted sovereign credit rating. Under various warming scenarios, we find evidence of climate-induced sovereign downgrades as early as 2030, increasing in intensity and across more countries over the century. We find strong evidence that stringent climate policy consistent with limiting warming to below 2 °C, honoring the Paris Climate Agreement and following representative concentration pathway (RCP) 2.6, could nearly eliminate the effect of climate change on ratings. In contrast, under higher emissions scenarios (i.e., RCP 8.5), 59 sovereigns experience climate-induced downgrades by 2030, with an average reduction of 0.68 notches, rising to 81 sovereigns facing an average downgrade of 2.18 notches by 2100. We calculate the effect of climate-induced sovereign downgrades on the cost of corporate and sovereign debt. Across the sample, climate change could increase the annual interest payments on sovereign debt by US$45–$67 billion under RCP 2.6, rising to US$135–$203 billion under RCP 8.5. The additional cost to corporations is US$10–$17 billion under RCP 2.6 and US$35–$61 billion under RCP 8.5. Weniger anzeigen

Tailored financial instruments can support incentives for conservation for both current and future governments in the Amazon region. Linking deforestation to debt service costs could create a clear financial incentive to policymakers to enforce national rules aimed at preventing deforestation.

The ECB can break the impasse by putting pressure on Rome to approve the European Stability Mechanism treaty.

Die Lage in Washington spitzt sich zu. Im Januar erreichte die Verschuldung der dortigen Bundesregierung die gesetzliche Obergrenze. Und dennoch bleibt das Rating der Vereinigten Staaten unangetastet. Warum eigentlich? Ein Gastbeitrag.

The European Commission’s proposal to reform the Stability and Growth Pact (SGP) is old wine in new bottles. It fails to address the central problem that has contributed to the SGP’s failure from the onset – the lack of political will to implement the Pact’s provisions. Blatant conflicts of interest need to be tackled head on.

Poor countries’ greenhouse gas emissions are rising fast, and they need help to both deal with climate change and avoid becoming big polluters themselves. G20 nations should launch a finance facility against climate change on the lines of the Next Generation EU instrument with the aim of reducing carbon emissions quickly

A debt crisis looms in many poor countries as interest rates rise and the world dips into recession, meaning these countries will struggle to meet their Nationally Determined Contributions under the Paris Climate Accord. This column proposes the establishment of a Finance Facility against Climate Change. Funds raised through the facility’s bond issuance would be earmarked for emission reduction programmes in poor countries, and the bonds would be backed by rich nations’ commitments of future… Mehr anzeigen

A debt crisis looms in many poor countries as interest rates rise and the world dips into recession, meaning these countries will struggle to meet their Nationally Determined Contributions under the Paris Climate Accord. This column proposes the establishment of a Finance Facility against Climate Change. Funds raised through the facility’s bond issuance would be earmarked for emission reduction programmes in poor countries, and the bonds would be backed by rich nations’ commitments of future disbursements to cover debt service obligations of the bonds. This would allow the necessary frontloading of climate spending in poor countries, while minimising the short-term impact on donor countries’ budgets. Weniger anzeigen

Awareness of nature and biodiversity risks to the global economy is on the rise among investors and policy-makers. Financial authorities and markets are deepening their scrutiny of the link between environmental risks and economic and financial outcomes. Earlier this year, the Network for Greening the Financial System issued a statement on nature-related financial risks. It acknowledged that these risks, including those associated with biodiversity loss, could have significant macroeconomic… Mehr anzeigen

Awareness of nature and biodiversity risks to the global economy is on the rise among investors and policy-makers. Financial authorities and markets are deepening their scrutiny of the link between environmental risks and economic and financial outcomes. Earlier this year, the Network for Greening the Financial System issued a statement on nature-related financial risks. It acknowledged that these risks, including those associated with biodiversity loss, could have significant macroeconomic implications, and that failure to account for, mitigate and adapt to these implications is a source of risks relevant for financial stability. It is now critical that nature risks are properly integrated into macro-financial risk analysis in general, and debt sustainability analysis in particular. Just like climate change can amplify sovereign risk and drive up the cost of sovereign debt, nature loss can threaten a country’s debt sustainability. Weniger anzeigen

Awareness of nature and biodiversity risks to the global economy is on the rise among investors and policy-makers alike. Financial authorities and financial markets are deepening their scrutiny of the link between environmental risks and economic and financial outcomes. It is now critical that nature risks are properly integrated into macro-financial risk analysis in general, and debt sustainability analysis in particular. While the International Monetary Fund (IMF) has started to incorporate… Mehr anzeigen

Awareness of nature and biodiversity risks to the global economy is on the rise among investors and policy-makers alike. Financial authorities and financial markets are deepening their scrutiny of the link between environmental risks and economic and financial outcomes. It is now critical that nature risks are properly integrated into macro-financial risk analysis in general, and debt sustainability analysis in particular. While the International Monetary Fund (IMF) has started to incorporate climate risks into its key surveillance and monitoring exercises, including its frameworks for Debt Sustainability Analysis (DSA), it has not yet started to address nature-related risks. By omitting them, the IMF’s DSAs miss significant economic and financial risk. This report highlights the importance of integrating nature-related risks into DSAs and shows how it can be done. It does not only demonstrate that including nature is possible, but also provides compelling quantitative evidence that the inclusion of nature collapse scenarios is necessary to provide a full picture of debt sustainability risks to sovereigns. Weniger anzeigen

Mit der geplanten Einführung eines Antifragmentierungsinstruments öffnet die EZB ohne Not die Büchse der Pandora, argumentiert Moritz Kraemer, Chefvolkswirt und Leiter Research der Landesbank LBBW.

An effective global debt restructuring framework remains an urgent need, and a supportive
element could consist of a change of sovereign rating practices. By integrating severity of
financial losses in a default episode, rating agencies could better serve investors, while also
incentivising overleveraged governments to seek debt relief. As interest rates rise, the world
economy slows and food prices mount, procrastination around debt relief would result in
avoidable humanitarian… Mehr anzeigen

An effective global debt restructuring framework remains an urgent need, and a supportive
element could consist of a change of sovereign rating practices. By integrating severity of
financial losses in a default episode, rating agencies could better serve investors, while also
incentivising overleveraged governments to seek debt relief. As interest rates rise, the world
economy slows and food prices mount, procrastination around debt relief would result in
avoidable humanitarian crises. Weniger anzeigen

Biodiversity loss, decline of ecosystem services, and overall environmental degradation can hit economies through multiple channels. The combined macroeconomic consequences can impact sovereign creditworthiness. Yet, the methodologies published and applied by leading credit rating agencies (CRAs) do not explicitly incorporate biodiversity and nature-related risks.

Omitting them may ultimately undermine market stability. As environmental pressures intensify, the gap between the… Mehr anzeigen

Biodiversity loss, decline of ecosystem services, and overall environmental degradation can hit economies through multiple channels. The combined macroeconomic consequences can impact sovereign creditworthiness. Yet, the methodologies published and applied by leading credit rating agencies (CRAs) do not explicitly incorporate biodiversity and nature-related risks.

Omitting them may ultimately undermine market stability. As environmental pressures intensify, the gap between the information conveyed by ratings and real-world risk exposure may grow. A consistent approach to integrating nature- and biodiversity related risks into debt markets is long overdue.

This report models the effect of nature loss on credit ratings, default probabilities, and the cost of borrowing. The results have implications for stakeholders including credit rating agencies, investors, and sovereigns themselves. Weniger anzeigen

Anleger sind gut beraten, ihr Aktienengagement nicht zu verringern, sondern durch den Krieg in der Ukraine kurzfristig steigende Risikoprämien zu Zukäufen zu nutzen.

Deutschland ist eines von nur drei Ländern des Euroraums, in denen die Bevölkerung der EZB weniger Vertrauen entgegenbringt als ihrer nationalen Regierung. Die Deutschen mögen den Euro, aber nicht die EZB.

The pandemic-induced global economic crisis has contributed to the re-emergence of sovereign default risk, especially for emerging and developing economies, and has directed attention to the impact of the institutions that are tasked with attempting to predict defaults: the international credit rating agencies. This paper describes four main challenges posed by credit rating agencies, especially from a developing and emerging economies perspective: potential bias in ratings, pro-cyclicality of… Mehr anzeigen

The pandemic-induced global economic crisis has contributed to the re-emergence of sovereign default risk, especially for emerging and developing economies, and has directed attention to the impact of the institutions that are tasked with attempting to predict defaults: the international credit rating agencies. This paper describes four main challenges posed by credit rating agencies, especially from a developing and emerging economies perspective: potential bias in ratings, pro-cyclicality of ratings, governance issues and conflicts of interest, and incorporation of climate risk. It concludes with potential policy solutions addressed at ratings agencies, regulators, and policy makers. Weniger anzeigen

Der EU-Stabilitätspakt sollte der Schuldenaufnahme von Mitgliedstaaten Einhalt gebieten und finanzielle Schieflagen verhindern. Damit ist er gescheitert – auch, weil Verstöße selten geahndet wurden. Ein Gastbeitrag.

Die Bundesregierung sollte sich ein Beispiel an US-Präsident Joe Biden nehmen und den Nachfolger des vorzeitig scheidenden Bundesbankpräsidenten Jens Weidmann nicht parteipolitisch entscheiden.

Using 603 sovereign rating actions by the three leading global rating agencies between January 2020 and March 2021, this paper shows that the severity of sovereign ratings actions is not directly affected by the intensity of the COVID-19 health crisis (proxied by case and mortality rates) but through a mechanism of its negative economic repercussions such as the economic outlook of a country and governments’ response to the health crisis. Contrary to expectations, credit rating agencies pursued… Mehr anzeigen

Using 603 sovereign rating actions by the three leading global rating agencies between January 2020 and March 2021, this paper shows that the severity of sovereign ratings actions is not directly affected by the intensity of the COVID-19 health crisis (proxied by case and mortality rates) but through a mechanism of its negative economic repercussions such as the economic outlook of a country and governments’ response to the health crisis. Contrary to expectations, credit rating agencies pursued mostly a business-as-usual approach and reviewed sovereign ratings when they were due for regulatory purposes rather than in response to the rapid developments of the pandemic. Despite their limited reaction to the ongoing pandemic, sovereign rating news from S&P and Moody’s still conveyed price-relevant information to the bond markets. Weniger anzeigen

Credit rating agencies are relied upon as leading sources of credit risk information and act as gatekeepers to global debt markets. How well they fulfil their role is a key question when the agencies have taken a business-as-usual approach to sovereign ratings, despite the financial, economic, and social havoc wreaked by the pandemic.

Im Gespräch mit Dr. Moritz Kraemer, Chefökonom bei CountryRisk.io*, 17 Jahre Global Chief Rating Officer Sovereign Ratings bei S&P und Independent Non-Executive Director bei der europäischen Ratingagentur Scope.

China has much to gain from getting serious on carbon neutrality, and any delay would be tantamount to economic self-harm

With dozens of low- and middle-income countries facing debt distress and compounding risks from climate change, continuing to delay inevitable sovereign-debt restructurings will have dire consequences. Despite the growing risks, the G20's response still has not matched the scale of the challenge.

Why Germany should issue a 100-year bund now!

Many developing countries carry crushing debt burdens, but are reluctant to pursue much-needed restructuring, for fear of losing access to capital markets. This fear is overblown, and its persistence is raising the risks for debtors and creditors alike.

Many developing countries carry crushing debt burdens, but are reluctant to pursue much-needed restructuring, for fear of losing access to capital markets. This fear is overblown, and its persistence is raising the risks for debtors and creditors alike.

This policy paper proposes the introduction of a variable remuneration component for debt managers in Sub-Saharan Africa and other less developed countries characterised by relatively underdeveloped institutional capacity and governance standards. The aim is to improve debt management outcomes and public debt transparency by aligning the interests of decision makers with those of the public.

By Ulrich Volz, Shamshad Akhtar, Kevin P. Gallagher, Stephany Griffith-Jones, Jörg Haas, with a contribution by Moritz Kraemer.
We propose a Debt Relief for Green and Inclusive Recovery Initiative as an ambitious,
concerted, and comprehensive debt relief initiative – to be adopted on a global scale – that
frees up resources to support recoveries in a sustainable way, boosts economies’ resilience,
and fosters a just transition to a low-carbon economy.

Unlike in 2008, Asia has weaker balance sheets and a greater dependence on exports. With debt ratings set to slide and deglobalisation a risk, Asia must reassess its export-led economic model

Germany sold its first-ever federal green bond in early September. Analysts and commentators alike have displayed an elevated degree of excitement about the innovation. Some consider it to be a watershed moment for the wider environmental and sustainability bond market but, on closer inspection, the bond will probably disappoint those hoping to see it as an important building block for Europe’s green transition. Two main reasons explain why the bond is less green than first meets the eye.

Coronavirus pandemic has brought the continent’s day of reckoning forward.

If the European Commission’s proposal for a recovery fund is approved by member states, the EU would become the biggest supranational issuer in the world. To uphold the EU’s extremely high creditworthiness under a massively enhanced borrowing envelope, the Commission proposes that member states transfer up to 0.6% of gross national income to the EU budget per year until 2058, when the last bonds would be repaid. This amount will exceed the EU’s plausible annual debt service costs. But, explains… Mehr anzeigen

If the European Commission’s proposal for a recovery fund is approved by member states, the EU would become the biggest supranational issuer in the world. To uphold the EU’s extremely high creditworthiness under a massively enhanced borrowing envelope, the Commission proposes that member states transfer up to 0.6% of gross national income to the EU budget per year until 2058, when the last bonds would be repaid. This amount will exceed the EU’s plausible annual debt service costs. But, explains Moritz Kraemer, member states’ pledges of future transfers to the EU budget are effectively unenforceable promises.

As it stands, the biggest European institutional issuance programme would have the weakest of financial safeguards. Member states should provide more robust financial support. The following measures would support the EU’s own credit strength:
- The most straightforward form would be unconditional guarantees with cross-default clauses (as in the cases of the EFSF or the SURE programme)
- Provide the EU with a capital cushion (as in the cases of the EIB and ESM)
- Grant the EU a stable and meaningful own-resource tax base, in line with the Commission recommendations, or
- Provide collateral in the form of government bonds to guarantee the EU’s debt service on a rolling basis. Weniger anzeigen

About „Neues Wirtschaftswunder“ (New Economic Miracle)

The German civil society alliance "New Economic Miracle" was created on the occasion of the hackathon #WeVsVirus proclaimed by the German Federal Government in March 2020. The initiative is an association of representatives from civil society, business and associations working on the question of how a socio-ecological transformation of our economic system can succeed.

The core demand of the initiative is the alignment of… Mehr anzeigen

About „Neues Wirtschaftswunder“ (New Economic Miracle)

The German civil society alliance "New Economic Miracle" was created on the occasion of the hackathon #WeVsVirus proclaimed by the German Federal Government in March 2020. The initiative is an association of representatives from civil society, business and associations working on the question of how a socio-ecological transformation of our economic system can succeed.

The core demand of the initiative is the alignment of future government aid to the model of a social-ecological transformation, which it first published in April 2020 in the form of an open letter to the German Federal Government, followed by a petition to the German Federal Parliament (Bundestag), a catalog of measures for future government aid and numerous statements and analyzes to the public. Weniger anzeigen

Data shows rating agencies more reluctant to downgrade firms at the investment-grade boundary

Using 102 sovereigns rated by the three largest credit rating agencies (CRA), S&P, Moody’s and Fitch between January 2000 and January 2019, we are the first to document that the first mover CRA (S&P) in downgrades falls into a commercial trap. Namely, each first-mover downgrade by one notch by S&P results in a 2.4% increase in the probability of a rating contract being cancelled by the sovereign client, and a 1.2% decrease in the ratio of S&P’s sovereign rating coverage relative to Moody’s. The… Mehr anzeigen

Using 102 sovereigns rated by the three largest credit rating agencies (CRA), S&P, Moody’s and Fitch between January 2000 and January 2019, we are the first to document that the first mover CRA (S&P) in downgrades falls into a commercial trap. Namely, each first-mover downgrade by one notch by S&P results in a 2.4% increase in the probability of a rating contract being cancelled by the sovereign client, and a 1.2% decrease in the ratio of S&P’s sovereign rating coverage relative to Moody’s. The more first-mover downgrades S&P makes, the more their sovereign rating coverage declines relative to Moody’s. This paper interrelates three themes of the literature: herding behaviour amongst CRAs, issues of conflict of interest and ratings quality. Weniger anzeigen

Negative rates are not working. It’s time policymakers tried a more radical approach.

Reneging on £39bn payment may lead to downgrades of multilateral development banks.

Why reform of Basel rules is urgent – and how to improve on December 2017 proposals.

Political uncertainty usually means market volatility yet, since 2016, this hasn’t been the case. But whether it’s disorder in Europe or a slowdown in China, turbulenc is coming and investors should be cautious or risk getting burned.

S&P and Co are maintaining stable outlooks despite shutdowns and widening deficit.

If Britain votes to leave the EU, it’s likely to lose its place among an exclusive club of top-rated countries.

The pandemic-induced global economic crisis has contributed to the re-emergence of sovereign default risk, especially for emerging and developing economies, and has directed attention to the impact of the institutions that are tasked with attempting to predict defaults: the international credit rating agencies. This paper describes four main challenges posed by credit rating agencies, especially from a developing and emerging economies perspective: potential bias in ratings, pro-cyclicality of… Mehr anzeigen

The pandemic-induced global economic crisis has contributed to the re-emergence of sovereign default risk, especially for emerging and developing economies, and has directed attention to the impact of the institutions that are tasked with attempting to predict defaults: the international credit rating agencies. This paper describes four main challenges posed by credit rating agencies, especially from a developing and emerging economies perspective: potential bias in ratings, pro-cyclicality of ratings, governance issues and conflicts of interest, and incorporation of climate risk. It concludes with potential policy solutions addressed at ratings agencies, regulators, and policy makers. Weniger anzeigen