On Friday, the UK became the latest country to lose its coveted AAA credit rating as Moody’s (one of the “Big Three” ratings agencies) issued a downgrade based on what it described as Britain’s “sluggish” economic growth. The UK now joins France and the United States on the list of countries that have suffered a downgrade since 2008, leaving Germany, Australia and Canada as the only G20 economies with spotless AAA ratings.
Whilst the move is widely seen as a political humiliation for the British government, the economic consequences have been muted. The downgrade had been anticipated for some time, and critics argue that the agencies lost their credibility long ago through their failure to predict the financial crisis.
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.
Should Europe have its own ratings agency? We took this suggestion to Gunnar Hökmark, a Swedish MEP and Vice-Chair of the centre-right European People’s Party group. How would he respond to Daniel’s suggestion?
What do YOU think? Will there be any economic fallout from the UK’s credit rating downgrade, or are the consequences mostly political? Do the rating agencies still have any credibility after failing to predict the financial crisis? And does the EU need a European Ratings Agency to guarantee clear and transparent ratings? Let us know your thoughts and comments in the form below and we will take them to policy-makers and experts for their reactions.