"We would expect that when credit rating agencies assess the Greek risk, they take due account of the fundamentals of the Greek economy and the support package prepared by the European Central Bank, the International Monetary Fund and the [European] Commission," a spokesperson for EU Financial Services Commissioner Michel Barnier said yesterday (EurActiv 12/04/10).
The explicit warning to rating agencies on how to behave came after the euro collapsed more than 1.5% on Tuesday (27 April), following US agency Standard & Poor's decision to downgrade the debts of Greece and Portugal.
S&P's downgrade brought Greek bonds down to the same level as those issued by far less stable countries, such as Azerbaijan or Egypt.
"It's not up to the Commission to say whether the rating given by any one credit rating agency is correct or not," the EU spokesperson rushed to make clear, trying to veil blatant interference with markets.
But the message could not have been clearer when she added that the Commission "of course expects that credit rating agencies [...] in particular during this difficult and sensitive period, act in a responsible and rigorous way".
Too strict or too mild?
However, it is difficult to say what the responsible way to act is, especially taking into consideration the approach that the European institutions have adopted thus far regarding credit rating agencies.
Just a few months ago, former EU Internal Market Commissioner Charlie McCreevy said indeed that rating agencies had failed to "sniff the rot" at the heart of securitised products, which turned toxic with the credit crunch.
Although far from being a market regulation hawk, McCreevy pushed forward a clampdown on rating agencies, based on the idea that they were responsible for the financial crisis because they did not warn of the risks surrounding certain financial products (EurActiv 13/11/08).
For credit rating agencies, acting responsibly at that time meant downgrading risky debt, and therefore protecting investors and savers from unexpected and unrecoverable losses.
Ironically, now that they are doing so by sending warnings on debts endangered by incautious national economic policies and structural European indecisiveness, they are being rebuked by the EU executive.
"The Commission has already taken action to put in place a regulatory framework on credit rating agencies and will continue to watch closely the behaviour of the financial markets during this crisis," said Comissioner Barnier's spokesperson.
Standard & Poor's did not seem to pay much attention to the EU executive's warnings, since it announced a downgrading of Spanish debt shortly after the Commission's statements.
An awkwardly-timed meeting
No warning was sent to the German authorities, which contributed to the further collapse of Greek accounts by spreading rumours of their opposition to the already agreed bailout plan for Athens (EurActiv 26/04/10).
To define a final common position and calm down markets, the EU presidency instead called an extraordinary summit of eurozone leaders on 10 May, two weeks after the market meltdown (EurActiv 28/04/10).
The timing of the summit is designed to take into account Germany's regional elections, where Chancellor Angela Merkel's party risks defeat on 9 May, especially if she shows sympathy for the profligacy-prone Greeks, according to polls.
