Debt: Will no-one rid us of the rating agencies?
7 July 2011
Quick to denounce the ‘oligopoly’ of the rating agencies, European leaders have so far failed to take concrete steps to counter their baleful influence, writes Portugal’s Público daily.
A chorus of politicians from the European Union and beyond arrived here yesterday, July 6, to publicly denounce the “oligopoly" (the word used by German Finance Minister Wolfgang Schäuble) of the rating agencies.
Now that Portugal's debt has been downgraded to "junk bond" status, the incomprehension, outrage and criticism have been joined by the promise from Wolfgang Schäuble that the EU will “take steps" to put an end to the devastating power of these agencies across the eurozone.
The threat would be beautiful if it were not so worn out. Since 2008, European leaders have been multiplying their bombast against the absurd actions of the agencies, but they haven’t actually done anything concrete to punish them.
While the United States have amended their banking regulations to reduce their power and China, rather simply, has set up a national agency, Europe has never gone beyond pious hopes, reinforcing the impression that fresh ideas and real power have gone off on holiday from Brussels, Paris and Berlin.
Given this vacuum, it’s normal for agencies to thrust out their chests and go looking for ways to kick sand all over the vulnerable euro. What’s in play today are not just the difficulties that Portugal (not to mention Greece) is having in meeting its commitments: it’s also the agencies' tendency to a kind of necrophilia that makes them behave like vultures hovering over the fragile single currency languishing under the southern sun.
Unable to stand up to them, offering new evidence of its confusion to the world every day, Europe responds only when she finds herself on the ropes. For their part, noting the tender fragility of those who swore to fight them, and who also recognise at the same time the losses for private investors looming from any restructuring of the Greek debt, the agencies are responding in the way most natural to them: by piling on the pressure and intensifying their offensive. When politics bow to the organised onslaught of financial capital, there is not much to hope for.