After an incredibly long hiatus, The Telegraph’s star financial columnist/reporter Ambrose Evans-Pritchard is back.
Given the ructions in the EU — which is his wheelhouse — his voice has been sorely missing during his sabbatical.
Topic A for Ambrose? The EU’s newfound disdain for the ratings agencies, which have been speaking the truth about the Greek bailout (yes, the Greek rollover is a default) and Portugal (c’mon, of course it should be junk-rated).
That’s earned the ratings aencies all sorts of scorn in recent days, with German FinMin Wolfgang Schäuble and EU President Jose Barroso both talking about breaking up their oligopoly.
Sure, there are flaws with the raters, but as Prithcard points out…
But let us be clear. The EU itself brought this about by declaring war on the very investors needed to finance the vast borrowing needs of the European project. By baying for the blood of bankers and “speculators” (ie pension funds and the like who bought Greek, Portuguese, and Irish debt in good faith), Chancellor Merkel has set off capital flight and raised the spectre of defaults. Her specific demands for “burden-sharing” by Greece’s private creditors (and therefore Portugal and Ireland next) have changed the landscape. The agencies have no choice at this stage. Their job is signal default risk.
What should have been done is obvious. The EU’s bail-out fund should have been given powers mop up the bonds of countries in distress on the open market at a hefty discount (as the ECB suggested). Investors would have suffered condign losses, and the EU could have given Greece debt relief by retiring bonds with no net loss to European taxpayers.
This elegant solution was blocked by Germany because it was seen as a slippery slope towards a Transfer Union, and might have violated the Grundgesetz. (In a sense the Germans are right, but you shouldn’t join a currency union in the first place if don’t realise that it implies fiscal union.)