By Ilya Kharlamov
In the next few months, Europe will create its own rating agency that will determine the reliability of the financial and economic status of the European Union countries. Virtually, this will become a counterweight to American agencies the forecasts of which often deepen the crisis in the Euro zone.
The rating agencies have long become independent players on the world market. The stability and investment attractiveness of countries and even whole regions often depend on their ratings and forecasts. In fact, some experts believe that in many cases, these agencies fulfill certain orders given by one player or the other who are competing on the global economy for its interests. Whether this is really true or not is a rhetorical question. However, concrete results of this activity have been felt by those who fell into disfavour of the analysts of rating agencies. The largest agencies – Moody’s, S&P and Fitch – are located in the U.S. and this gives ground for the Europeans to accuse them of bias in their assessment of the state of affairs in the Euro zone.
In any case, the downgrade of credit ratings of the European countries has more than once stirred crises. In fact, even the information about the plans of the agencies have been accompanied with a sharp strengthening of the dollar against the Euro. Meanwhile, the EU powerhouses such as Germany, and France proved to be in the zone of risk. Understandably, Europe’s debt problems demand systematic measures, but in the information age, the activities of the agencies often create an additional risk on the behaviour of the markets.
Nevertheless, the three largest American agencies enjoy reputation and their ratings are used across the world and in these circumstances, it is a big question whether the new European structure will be politically unbiased, says expert of the “Grandis Kapital” Company, Denis Barabanov.
“It is a new agency and world banks and funds will hardly use its information. It takes time to acquire a reputation and understand whether the agency is politically independent. Understandably, the agency is being created to have an organization that will make higher ratings on European countries than that of, say Fitch. Otherwise, there is no need to create a competitor to the American agencies,” Denis Barabanov said.
The head of the Assets Management Department of the “Kapital” Company, Renat Malin calls into question the independence of the European agency.
“This is an opportunistic decision that reflects the need for an instrument that will be more politicized than the existing international agencies. The risks of sovereign countries in the Euro zone will be examined from this standpoint. They want to go away from the issue that private and market-oriented agencies exert influence on the process of solving the crisis in Europe. Consequently, Europe needs an instrument to support this process,” Renat Malin said.
Meanwhile, the European rating agency, according to its creators, will not be a relay station of the authorities’ point of view because it will be created with the support of German industrialists and will be a private one. In fact, this idea of creating an agency to counterweight Moody’s, S&P and Fitch was put forward by German chancellor Angela Merkel. The other EU leaders, who accused the three giants of dominating the market and making unfavourable forecasts for the Euro zone, agreed with her.
A few days ago, parliamentarians put forward an initiative under which international agencies will be banned from publishing ratings of a country without the permission of its government. It’s unclear how this will be implemented when taking into account the freedom of spreading information in the U.S. where the three agencies are registered. In short, Europeans will have an access to the ratings of these agencies.
Moreover, monopolists have no intention to lose the positions they have already won. Moody’s officials said that the European leaders’ plan would be dangerous for the investors of the whole world and warned the new regulations of the agencies’ work would affect the quality and independence of ratings. However, Europe has long called into question their authenticity.