EU declares war on agencies as Ireland’s rating gets junk status

EU commissioner Michel Barnier takes on the big three credit ratings agencies: Standard & Poor, Moody’s and Fitch Ireland yesterday became the third eurozone country to have its credit rating downgraded to junk status as Europe slid into a war it may struggle to win with international credit ratings agencies. It followed a week in which the agencies partly forced a shift in the EU response to the Greek sovereign debt crisis. A week after slashing Portugal’s status, Moody’s cut Ireland’s credit rating to junk and warned that the country would be likely to require a second bailout. The Irish government, which wants to return to debt markets in 2013 when its current EU-IMF bailout runs out, said the development was completely at odds with the recent views of other ratings agencies. “We are doing all that we can to put our house in order and the progress that we are making is there for all to see,” the department of finance said in a statement. The commissioner in charge of the EU’s single market, French politician Michel Barnier, alternately sneered and threatened the three big agencies who dominate 90% of the ratings industry: Standard & Poor’s, Moody’s and Fitch. His remarks followed a broadside on Monday from fellow commissioner Viviane Reding, who said the ratings agencies’ “cartel” should be “smashed up” as they were seeking to determine the fate of Europe and its single currency. “We were surprised that the agencies would downgrade a country without any warning,” Barnier said of last week’s verdict from Moody’s on Portugal, branding its debt junk and predicting the country was the new Greece. “You don’t rate a country the same way you rate a company or a product. That’s an issue. We’re examining that issue.” Barnier said he would announce “stiff measures” in November aimed at taming the power of the agencies. They would be forced to justify their decisions by revealing the details of their analyses and criteria. Whether they were properly registered in Europe would also be scrutinised. “I want to have transparency regarding their methods, especially when they are rating countries,” he said. S&P concluded last week that Greece would be found to be in a form of default on its sovereign debt if its private creditors were involved in a new EU bailout, as is planned. That verdict helped to trigger the rescue rethink announced over the past 48 hours in Brussels. Christine Lagarde, the new IMF chief, when French finance minister, suggested that the agencies be banned from delivering ratings decisions on the eurozone countries being bailed out: Greece, Portugal and Ireland. “It’s just an idea,” Barnier addedHe said he would ask the Poles on Monday, who are chairing the EU, to put a ban on the agenda of EU finance ministers. Jacek Rostowski, the British-born Polish finance minister and former Tory party member, will be chairing the meetings of EU finance ministers for the next six months. He looks an unlikely convert to the Barnier ban. Ratings agencies European monetary union Euro Currencies Europe European Union Financial sector Ian Traynor guardian.co.uk

Posted by on July 13, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.