It may be an affront to free speech, or just a plan that is totally unrealistic, but the EU wants to ban credit ratings of the sovereign debt of its most troubled nations.
“We are actively considering suspending or banning ratings” in cases where nations are making “full efforts” to implement assistance programs, Michel Barnier, the EU’s financial services commissioner, told reporters in Brussels. What countries? What “full efforts”?
This idea only shows how desperate officials in the region are. It is immature to believe that a ban will stop the agencies from rendering opinions of the troubled nations. Agency personnel could be blocked from entering these countries in order to make informed assessments. This probably would result in downgrades due to the lack of fresh information the markets need to make investments. That would be the most dangerous set of circumstance of all for global capital markets investors.
There is to be a summit of the EU region’s leaders this weekend. And there is hope that the summit will produce a negotiated settlement and a facility created to rescue the region’s most financially troubled countries. Now, France and Germany say they are at odds about how such a facility should work and how it will get funds. The meetings will be useless and hardly worth attending if the two largest countries in the region by GDP have found no middle ground. Without it, there will be a perception, almost certainly correct, that Greece will fall into default. The costs for other weak southern European nations to raise money will rise.
A broken summit will bring the big three credit rating agencies back into the capital markets with new opinions about the risks of investment in certain EU nations. Officials in the region can try to suspend those ratings. But investors will not ignore the opinions because the EU says they are “banned.” All the proposed ban says is that the countries with problems want to be left alone and their problems ignored. The chance that will happen is zero.
Douglas A. McIntyre
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
