credit-downgradeAfter weeks of threats and rumours, credit ratings agency Standard & Poor’s (S&P) finally downgraded nine eurozone countries last week (including France, which lost its treasured triple-A credit rating). S&P said the EU draft fiscal compact is not enough to fight the debt crisis. The decision comes two weeks before 26 EU leaders will meet in Brussels to agree to a new fiscal treaty, and around 100 days before French Presidential elections, when President Sarkozy will try for re-election. Do YOU think S&P’s judgement (and the timing of its release) was 100% objective? Olli Rehn, the European Commissioner for economic and monetary affairs, has strongly criticised the decision, saying it is “inconsistent” and didn’t recognise the “decisive action” that had been taken by the eurozone.

What do YOU think? Should we trust credit ratings agencies to be objective and impartial? Are they simply reflecting economic reality? And do they even matter? In a highly volatile market, it doesn’t always follow that a country will pay higher interest on its loans if its credit rating is cut. Send us your thoughts on the credit ratings downgrade and its implication, and we’ll take them to policy-makers and experts for a response.

20 comments Post a commentcomment

  1. avatar
    Zoltan Kiss

    I don’t know how long sovereign governments will be on their knees in front of these evil people. There has to be something done about them cause they only make things worse and are not helping recovery at all. They only serve the top 1% of the population and the rest can screw themselves in their greedy mind.

  2. avatar

    Of course they are not and everybody involved is fully aware of that. Their shareholders reality is questionable, their criteria vague and anything but consistent , their ratings proved to be unsucessful and someone must be naive to trust their judgements!

  3. avatar

    Didn’t the rating agencies give tripple AAA to the cdo and cds in 2007-2008…? Didn’t they say back then that it was ‘just’ their opinion? Markets should stop listening to these rating firms. They have to much power for not being regulated.

  4. avatar
    Craig Willy

    Merkel’s top economic adviser has just repeated they remain opposed to eurobonds and ECB intervention (lender-of-last-resort rehtehteh).

    The policy of half-hearted ECB/Council bailouts has thus far led to recession and concurrently lower revenue/worse debt-to-GDP ratios. The Germans (say) they want to continue on this path come what may. So, in the immediate, why should S&P or anyone else believe the eurozone has a plan to leave recession and escape the debt spiral?

    (It goes without saying that the eurozone’s average fiscal situation is no worse, and oftentimes rather better than that other developed countries, e.g. U.S.A., U.K. and Japan.)

  5. avatar
    Michael Tsikalakis

    If we define the words “trust and credit” and their application to the financial markets then we will realize, and there is no need to explain, how important these agencies are to these markets. However this great importance of these agencies, gives them the power to control the financial markets and consequently play a very important role to the financial stability of one country. Europe should have encouraged the establishment of such agencies in a European ground before the crisis. Now I think that is too late. However we have to move fast with the first issue of the European Financial Defense policy which is the Eurobond before Germany gets downgraded too. If that happens then I would not like to see the next scenario.

  6. avatar
    Sebestyén Zsuzsanna

    I am a citizen of the Republic of Hungary. I do not agree with the way Viktor Orbn and Fidesz-Hungarian Civic Party, abusing with the majority in the Parliament, which they won at the election of 2010, destroys the democratic institutions of our country! I do not agree with the limitation of the power of the Constitutional Court, and I do not agree with the elimination of it’s independence by the nomination of party members to the Constitutional Court judges! I do not agree with any governmental attempts to eliminate the independence of the municipalities! I do not agree with the nationalization – by menace – of pension fund savings of three million people! I do not agree with the restrictions on freedom of the press, the closure of radio stations, placement of the printed and electronic media under supervision! I do not agree with cropping of electoral law on their own benefit! I do not agree with the “unorthodox” economic policy, which isolates my homeland and makes the everyday life of my compatriots more difficult day by day! I do not agree with the legislation with retrospective effect. I do not agree with the society owning the policy of the government! I do not want anyone to think all these felonies were committed with the support of the people of the Republic of Hungary.

  7. avatar
    Christos Mouzeviris

    Ah so now that they have downgraded more countries, including France we start to realize that those agencies have an agenda…When they were downgrading Greece and Ireland we were just saying kick those lazy corrupt ungrateful lot out of the eurozone!! Some people need a reality check..!!

    So while part of me is glad to see more countries being downgraded and I can not help but say “I told you so,” I am also worried about a further deepening of the crisis, more austerity, more unemployment, more poverty and instability..

    This is a war against the eurozone and Europe’s economy in general..Our leaders are trying to punish the “peripheral” economies while the problem lies in the very structures of the eurozone, and of course the EU as a whole….

    Yet our leaders still debate about of what it needs to be done, simply because they do not have the guts to do what it must be done…Meanwhile the populace are suffering..And our leaders once again will just gloss things over, hoping to leave office after yet another term and let history judge them and the next Government share the load of their mishandling of the situation…

    No ladies and gentlemen…We need reforms in Europe’s institutions, in Europe’s economic and political status quo.. Out with the old and in with the new..A political reboot!!

    Change our economic style, our capitalist system, our relationship with those agencies, if needed our relationship with the USA…create our own rating agencies (as Mr Romano Prodi suggested on euronews lately)..we do not have much time…better start doing the first steps now…out the IMF of Europe…there is only one way with it…bit by bit we are all gonna be sucked in it…

  8. avatar
    Miscarea Tehnocrata Romania Noastra

    @ Sebestyn Zsuzsanna – All this is possible in Hungary because the democracy have no mechanism to protect itself from non-democratical political organizations. The Romanian constitution prohibits explicitly any extremist political organization. We have too a far-right movement but is an NGO. They are not allowed to have a party. In this way the non-democrats have no voice in a democratical country and can not obtain political power. Our constitution is build so, because we had serious problems with legionaries in the time of the war. They educated their children in this ideology and even after 70 years they are still operating. The far-right extremists are very united, intelligent and extremely efficient and very well organized, much more the any other political force ever. They have an ideology, and we, democrats, don’t have. Democracy is not an ideology but a collection of spare principles. We need an ideology. The failed multiculturalism is one of the reason why far-right gain power. Every time, in crisis time, they grow. We must grow too. Is our only chance.

  9. avatar
    Miscarea Tehnocrata Romania Noastra

    The non-democrats must not be allowed to obtain political power in a democraticy’s means. They beat us with our own means. In a totalitarian state is not possible for democrats to go to power. In democracy a dictator can speak, spread the word, build and finally go to the power. Democracy is DEFECTIVE !

  10. avatar

    who rates the rating agencies? I bet Europe will overcome the crisis stronger and more unified than ever before. And than the same agencies will change their ratings.

  11. avatar
    Mike Dever

    They are as objective as they can be when their business models are so laden with conflict-of-interest. But mostly, the credit rating agencies are unimportant. Not just because they’re incompetent, which they’ve repeatedly proven. But because they’re unnecessary. That is because the markets already set the credit worthiness of any borrower that has outstanding paper. The price is out there. The price of credit default swaps is out there. That is the ‘real’ credit rating of a sovereign or corporate borrower. Ratings are both redundant and dumber than the crowd-sourced price that already exists. I talk about the failure of the credit rating agencies in my book “Jackass Investing.” I’m pleased to provide readers with a complimentary link to the chapter in which they’re discussed (Myth #13: It’s Best to Follow Expert Advice):

    Mike Dever
    Author, Jackass Investing: Don’t do it. Profit from it.

  12. avatar
    Nate Wunderman

    Absolutely not. Bear in mind that what the rating agencies put out are opinions that market players use to make bets in the same way that horse racing punters use tip sheets to decide what horse to bet on. Also remember that these same rating agencies are knee deep in the mortgage backed securities financial debacle that precipitated this entire economic mess to begin by rating said Wall Street toxic garbage as ‘AAA,’ while enmeshed in text book conflicts of interest. The best thing that European leaders could do is arrest those in the management of credit rating agencies who were responsible for the false information the moment they step on EU soil.

  13. avatar
    Daniel Suranyi

    Reading such statements over and over again, I always have to wonder why the politicians in Europe are not brave enough to just forbid ratings from private agencies and create a European Rating Agency (similar to the energy and telco regulators) that rates countries and big companies in Europe according to clear and transparent criteria and formulas.
    Of course ratings are required for “the system”, but they should not be commercialised to give actually somebody an interest to have ratings a certain way (remember that the raters earn dollars and profit from a weak Euro?).

    In the meantime, until the legal framework for a rating agency is set up, any agency publishing a rating about a European country or company should be forced to transparently publish the data base and formulas used to calculate the rating.

    Why are we still afraid of the americans? Now more than ever it is time for Europe to show that we are not only blindly following what comes from the states, but that we have an own identity and that politics is more than just following the highest bidder…

  14. avatar
    Christos Mouzeviris

    Daniel I do not think we are afraid of the Americans.I think our politicians are listening to the lobbies who are being paid, controlled or make profitable agreements with the Americans..In other words our leaders are being “bought”….Or perhaps blackmailed….who knows…the result is one though…

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