Europe needs to ditch cover-up solutions for the continent’s credit woes before anyone can be confident that the union truly understands what the root of their debt problem is.
Too bad they’re still blaming the ratings agencies for being too conservative. In an interview with France 24, The European Commissioner for Internal Market and Services, Michel Barniered wishes that friendly credit ratings could be issued for Greece, rather than harsh real ones.
“I was surprised by the brutal way they downgraded Greece’s rating. I won’t comment on the results, but I think that there should be more consideration when rating a state”, Barnier told FRANCE 24. He went on to say that he believed that agencies should contextualise the situation of a country before issuing a damaging downgrade.
Whoever thinks that Greek ratings downgrades don’t reflect reality are free to bet against the ratings change every day in the market. Load up on Greek bonds.
In interviews with various French media, Barnier advocated for increased transparency among the three leading credit rating agencies, Standard & Poor’s, Moody’s and Fitch, and put forward the possibility of creating a European credit rating agency as an alternative to the US-dominated institutions.
In the French business daily Les Echos Barnier observed that the “landscape of credit rating agencies” is too concentrated given the importance of the decisions they make. “I’ve been thinking carefully about the idea, about the feasibility and the added value of creating a European agency”, Barnier said.
The idea of a European credit rating agency is perfectly fine, as long as they realise it will only be listened to if its credit ratings are seen as credible by the market. If it’s always issuing nicer ratings while private companies are more strict, then a European credit rating agency will be useless.
In fact it could be dangerous even, since it might allow some institutional investors to buy sovereign debt that they normally would be barred from buying thanks to inflated ‘European’ credit ratings. Thus the idea is sound as long as its decisions are truly independent and credible. In any other form, they’d be a waste of time at best.