martedì 23 ottobre 2012

When will we have a European rating agency?

What caused Europe crisis derives from multiple factors. It is not only a matter of sovereign debt crisis. Behind the worst crisis since 1929 there is more than this. On the day when China and Russia launch their own rating agency - the Universal Credit Rating Group - my mind goes back to when the American ones used to downgrade our continent economy.
It all started with Greece in 2009, when rumors that Athens wasn't able to pay its debts led to default fears. Ireland, Portugal and Spain together with Greece soon became the so called PIGS. An acronym very useful when the three American rating agencies monopoly used to describe the reasons behind the downgrading of the above mentioned countries.

Who's behind the rating agencies is well-known. Rating agencies have been making false statements and analyses concerning banks on the edge of failure, as in the Lehman Brothers case. One of the greatest financial scandals ever. Rating agencies acted as if in a football match the referee was clearly a supporter of one of the two rival teams.

The problem is today's crisis is due to the increasing power of a wild market system where everything is allowed. The regulator is influenced by money more than realistic previsions when deciding. It is the abdication of politics and the rise of a disaster movie about finance.

China and Russia idea to create their own rating agency goes in the direction to stop a monopoly where almost 90% of the world market is rated by Moody's, Fitch and S&P. What about Europe? The only country to be really hit by the three sister misleading analyses doesn't seem to respond properly. The norms on the regulation of rating agencies activities and the Tobin Tax could be ok but what about the creation of a European rating agency? If rating agencies are necessary for the market to survive, a European one would certainly help the system to be more balanced. In time we'll see.


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