EC criticizes US risk rating agencies handling of the Euro-zone crisis
A top official from the European Commission was particularly critical of the credit risk rating agencies in their handling of the Euro crisis and Germany brushed aside the latest rating agencies announcement saying the country is in a very sound economic and financial situation.
“It is interesting to see that whenever the budgetary situation in the US worsens, certain risk rating agencies turn their guns on Europe”, said EC Vice president Ms Viviane Reding at a Wednesday press conference.
This week there is an ongoing major clash in the US Congress over fiscal policy with neither party having the sufficient votes to support their position and with little margin for compromise in an electoral year.
This week also Moody’s Investors Service changed the outlook on the provisional (P) Aaa long-term rating of the European Financial Stability Facility (EFSF) to negative from stable, a blow to a fund that was supposed to backstop struggling European Union members.
The ratings agency said the move followed on from its decision earlier in the week to change the outlooks for Germany, the Netherlands and Luxembourg to negative. All three countries are guarantors for the EFSF, with Germany holding the largest share at just over 29%.
Further more Moody's also changed the outlook of 17 German banking groups from “stable” to “negative”. The institutions affected are those whose financial evaluation depends on the ”support of the German Federal State or Landër (federal districts) and communities,“ the agency stated in a Communiqué.
Ms Reding said that the US sovereign debt is now equal to 101% of GDP and the budget deficit stands at 7% of GDP, while for the European Union the situation is 91% and 3%, respectively.
“Europe has given huge strides and advanced enormously in the last three years in its individual and collective effort to put its finances in order”.
“Whatever the US credit rating agencies say, Europe is now on track to budgetary consolidation with the solid German economy as the anchor and with its impressive powerhouse to support it”, said Ms Reding.
“Let’s not forget that the rating agencies market is dominated by three large US agencies, Moodys’, Standard&Poor’s and Fitch”, added the EC Vice president.
Countering the move by Moody’s, Germany’s finance ministry said the rating is a short-term view, and the country is “in a very sound economic and financial situation”.
“There's a lot of trust in Germany on the international financial markets; this is reflected in the low refinancing costs of German government bonds” was Berlin's official reply.
“Germany will, through solid economic and financial policy, defend its ‘safe haven’ status and continue to responsibly maintain its anchor role in the euro zone,” the Berlin-based ministry said in an e-mailed statement. “Together with its partners, it will do everything to overcome the sovereign debt crisis as rapidly as possible.”
Suggested Stories
-
May 17th 2013
Pope Francis condemned the global ‘cult of money’ and the ‘new idols’
-
May 17th 2013
Prince Harry and PM Cameron launch in New York global campaign to promote Britain
-
May 15th 2013
EU recession for the sixth consecutive quarter; France joins the club with 0.2% contraction
-
May 14th 2013
New WTO chief says it’s time for ‘modulating’ ambition and pushing protectionism back
9 comments Feed
Note: Comments do not reflect MercoPress’ opinions. They are the personal view of our users. We wish to keep this as open and unregulated as possible. However, rude or foul language, discriminative comments (based on ethnicity, religion, gender, nationality, sexual orientation or the sort), spamming or any other offensive or inappropriate behaviour will not be tolerated. Please report any inadequate posts to the editor. Comments must be in English. Thank you.
It is no coincidence that when the Euro was talked of as an alternative to the US dollar that the systematic undermining of the currency started from the US and the ratings agencies. It has been a non-stop onslaught that has worsened the situation in the Eurozone, (though they were heading for a wake-up call anyway). It should have been predicted when the Eurozone countries tried to take on the only world superpower. The US were never going to roll over regarding the dollar and it is a cautionary tale to any other countries that think the yankie dog is dead. Not yet, and not for a long time.
True, bribe Camoron and he will do what is told, pure to keep that bogus “AAA” rating. Chumps are falling for it.
In short, the credit agencies have undermined their own credibility. Ultimately, is all depends on where investors want to put their money. Currently the UK is seen as a safe haven in a world financial storm. We shall see if that confidence is justified in time.
these same rating agencies rated toxic packets of US subprime loans to be sold to (stupidly greedy) European banks as AAA, thus seems to serve US economic policy only.
They were also the same agencies that rated highly the sub-pime mortgage market in the US. One wonders how they are still trading or why anyone listens to them.
@5 If CFKC ever heard of you she would be getting a restraining order. You sound seriously creepy when you write about her.
“which one of us do you think she'd rather meet if she's ever read this blog?”
Judged by her cabinet it would be one of the 'Yes'-men and certainly not anyone who tells an unpleasant truth about the state of Argentine economy.
Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!