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Merkel calls for European credit rating agency

The Local · 17 Jul 2011, 19:26

Published: 17 Jul 2011 19:26 GMT+02:00

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"It is important in the medium term that Europe also has a ratings agency,"

she said in an interview with public broadcaster ARD.

"The Chinese now have a ratings agency," the chancellor said - adding the new body should be created by the "European economy" and not by states.

There had not, until now, been much interest in creating such an agency, but there was a void, Merkel continued.

"I would really welcome it (if) the European economy manages to create a ratings agency," she added.

The European Commission has in recent days roundly criticised the world's three leading credit ratings agencies, questioning the timing of their debt downgrades, which influence prices and interest rates in the sovereign bond market.

Ratings agency Fitch severely downgraded Greece's credit status this week, as the eurozone struggled to contain a debt crisis contagion. Last week another agency, Moody's Investors Service, downgraded the debts of Ireland and Portugal to junk status.

EU leaders object that Standard & Poor's, Moody's and Fitch are an "oligopoly" issuing self-fulfilling prophecies of doom, greatly aggravating the eurozone debt crisis.

The EU's Internal Markets Commissioner has suggested a partial gag to

prevent them from grading debt issued by EU economies being rescued with

Story continues below…

official funds.

There is also an undertone of critical comment that they are based in the United States.


The Local (news@thelocal.de)

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Your comments about this article

19:55 July 17, 2011 by Englishted
Don't make a new one,just ignore the old ones .

Simple and cheaper.
20:48 July 17, 2011 by mkvgtired
So she wants a ratings agency that would conveniently look the other way when Greece (and Portugal, etc.) continues to issue debt during a crisis? I thought Merkel was smarter than that. The ratings agencies provide the data and reasoning for their downgrades. If it was a garbage argument the markets would not react to the downgrades. If there was a government owned agency that continued to look the other way, it would not retain any credibility anyway.

Also, Fitch's parent company is based in Paris, and it is dual headquartered between NYC and London. Last time I checked Paris and London were both in Europe.
23:05 July 17, 2011 by olog-hai
Correct about Fitch.

And aren't these the same people that railed against the "Anglo-Saxon system"? Isn't that a bit racist . . . ?
23:59 July 17, 2011 by r2d2c3po
Of course the silly wench would want an agency that is both blind and stupid. Why else would any reputable agency like Fitch downgrade Greek bonds to a little bit better than toilet paper?
00:30 July 18, 2011 by Bushdiver
She can wish and maybe even get a Europeon Rating Company but in the end nothing will change. The Greek net worth or better yet worthlessness isn't going to change. The Greek debt won't dissapear and the not so smart Germans are going to keep throwing good money after bad in hopes that one day Greece will be able to repay their debt.(Highly doubtful). The current rating agencies be it good or bad are established agencies where as a new Europeon agency wouldn't be trusted to begin with. Therefore a waste of time.
01:11 July 18, 2011 by ChrisRea
@ r2d2c3po,

After they messed up big time but over-rating the RMBSes and so causing the sub-prime crises, Fitch tries to avoid any risks and under-rates everything. Contrary to what mkvgtired said, the rating agencies do not provide the details of their analyses and criteria, only the conclusions they presumably reached. I hope that the legal initiative to be adopted in November (stipulating that they actually have to back their ratings with data) will pass.
18:04 July 18, 2011 by Beachrider
She might be able to get higher rating that way.
14:56 July 21, 2011 by mrz
As a proponent of free market capitalism, I think a competitive ratings agency based in Europe would be a very good thing, but not to rate Euro denominated debt. Rather, to rate American issued debt. As an investor, I would have no faith in a European agency created to provide an alternative rating for Euro-debt. The track record of Moody's et. al. is that they are disastrously late determining a down grade. To create an agency with an even more favorable view of Greek (Irish, Itallian...) debt would be ridiculous. Now, it would be interesting to hear a European analysis on the ability of American States and the US Federal Government's ability to service its debt. That would be a valuable alternative perspective.
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