EU Moves to Quash Rating Agencies
After Moody’s credit rating agency downgraded Portugal’s debt rating to Ba2—junk status—on July 5, the European Union has been gunning for the world’s three main rating agencies.
Moody’s gave Portuguese debt a negative outlook, meaning it may downgrade the debt further later. Portugal will have “formidable challenges” in cutting spending and may need another bailout, it said. Ireland is now worried that it too will have its rating cut to junk status. Europe has plainly not solved its economic problems.
The EU’s response to this downgrade has shown its natural anti-democratic instincts. Upset that the rating agencies are critical of their precious project, EU leaders are trying to punish the agencies. “We must break the oligopoly of the rating agencies,” said German Finance Minister Wolfgang Schäuble.
“It’s quite strange that the market is almost dominated by only three players. It seems strange that there is not a single rating agency coming from Europe,” said head of the European Commission José Manuel Barroso. “It shows that there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe.” He’s not telling all the truth—Fitch is owned by Fimalac, a French company.
“The EU authorities are attempting to muzzle free opinion, first by threatening Fitch, Moody’s and S&P with vague retribution, and then by drafting restrictive laws to prevent them from publishing unwelcome messages,” warned the Telegraph’s international business editor Ambrose Evans-Pritchard. In taking up this cause, the EU is on “a slippery slope,” he warned.
“It is financial repression, pure and simple,” he wrote. “The same will be done to the press in due course. Then to you, dear reader.”
Barroso said the EU will likely introduce a draft law by the end of the year that will, in effect, enable the Union to get around the rating agencies.
Its approach to the rating agencies confirms that at heart the EU is an undemocratic institution that will squash anything that gets in its way.