Guardian
March 31, 2011
Remember when your mum told you to stand up to bullies. Not always a good idea, it seems. With economies across Europe now facing meltdown, the credit rating agencies that did so much to help them get into this mess have, according to Reuters, warned the European Commission they may stop rating risky countries. Why? Because the EU has had the temerity to suggest they should be legally liable if their ratings prove to be wrong.
This threat, which would leave weaker European countries struggling to raise cash, comes amid an escalating battle between European officials and the ratings agencies. But it could also mark a turning point for the credit agencies – still under fire for their role in the credit crisis, a moment when these behemoths may finally be called to account.
Relations between the three main credit agencies and the EU hit a new low this week after Standard & Poor's downgraded Portugal and demoted Greece's credit status to below that of Egypt. Not so long ago, credit rating was a staid and not terrible interesting business – few cared what they thought of Greek bonds or Portuguese debt. It wasn't until the 1990s that the agencies started to rule the world. Riding on the back of globalisation and technology, the two grand forces of our age, credit agencies managed to establish themselves as the dominant independent arbiters of risk.
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