Just after Standard & Poor’s warned it would downgrade 15 of the 17 eurozone countries if EU leaders didn't strike a deal to save the euro at a summit on Friday, vice president of the European Parliament Gianni Pittella (S&D) called to strip rating agencies of their sovereign rating power, announcing changes to the Commission proposal on rating, which has just landed in the Parliament.
Centre-left Italian MEP Gianni Pittella is vice president of the European Parliament.
A new day and a new downgrade. What is your view on this?
It has been a long time since we have proposed to reduce the unlimited power of credit rating agencies through increased competition and stricter regulation and controls. We were confident in a more ambitious proposal from the Internal Market Commissioner Michel Barnier, but instead we have a got a very weak proposal [on the review of ratings agencies in Europe].
But the European Parliament has the power to change it.
Together with the Parliament rapporteur, Leonardo Domenici (S&D), we will fight to strengthen the proposal, with the aim to increase the power of ESMA [European Securities and Markets Authority] to suspend ratings of certain countries in specific conditions; and to study the feasibility of establishing an independent European agency, especially when it comes to rate sovereigns.
Who else could rate sovereigns?
Either the European Court of Auditors or the European Central Bank. We want to take the control on sovereigns ratings away from the grip of the agencies. I am convinced that certain evaluations of sovereigns are more due to political considerations than to technical analysis.
The ECB or the ECA would only rate countries in difficulties?
They could rate sovereigns when countries are under aid programmes. We will make a proposal in this direction, or even we will support the more extreme option to completely suspend sovereigns rating.
Who does support the Socialist party in this position within the EP?
The debate has just started. We will see. I am confident that we will have a majority in this direction.
And what is the role of financial news agencies? Have they also favoured the speculation?
Certainly yes, but when a rating agency gives a negative note, it sends a much more powerful message than news agencies can do.
Changing subject, the Franco-German rule of Europe is nothing new, but in this situation are Angela Merkel and Nicolas Sarkozy helping Europe or damaging it?
So far they have damaged Europe. There have been in the past duopolies which favoured Europe, like in the case of [former German Chancellor Helmut] Kohl and [the late French President François] Mitterrand, but they were great politicians, and they were supported by many leaders from other countries. Today Merkel and Sarkozy have showed not to be able to break free from the fears of their electorate. When in such a critical context, their solution is to propose in three months another Treaty change – that will take 2 or 3 years to be ratified – this means that they have lost the perception of the gravity of the situation. It is like to cure a deadly sick patient with the review of medical protocols. The patient needs oxygen and a quick treatment.
What would be that treatment now?
It would be injecting more liquidity into the market. The ECB should play the crucial role of lender of last resort, as it is doing now without an institutional recognition. We know that it is forbidden to lend money to governments. But the ECB can support the EFSF. This is the first decision I am waiting for from the summits on Thursday and Friday.
What is the rationale of changing the treaty again?
I personally do not understand it. Most of the things to fix the eurozone can be done with the existing rules. We can already introduce a stronger economic governance and stricter fiscal discipline and sanctions. We can already support growth through project bonds. We can already put together national budgets. We can already create a financial minister for the EU economy. Obviously, we can always change the Treaties again, but the priority now is to act quickly.
Speaking about the ECB president, Mario Draghi, how do you judge his first moves?
He is a man who acts instead of speaking. I can already see that his policy is different from that carried out by his predecessor, for example through a continuation and widening of the bond-buying programme.
Eurobonds are part of the solution?
Europe is based on the principles of cohesion and solidarity. If we deny this, we are denying Europe. In a family there are moments when you take and moments when you give. Nobody should complain too much when comes the moment of giving. Moreover, there are technical solutions, like the blue bond proposal, that allow a fair share of the burden. But above all, without eurobonds the eurozone is at risk of collapse.
The Commission has just issued its options on eurobonds. Maybe too late and without a clear position. What is your opinion about President Barroso?
Barroso is the notary of the governments. He has been appointed and reconfirmed to play this role. This means that even when he makes good proposals, like in the case of the tax on financial transactions, he lacks the authority to have them approved. We miss a president like [Jaques] Delors. We need a stronger Commission.
How do you think it could be possible to get it?
Relaunching the idea of a direct election of the president of the Commission is the right way forward.
Is a Treaty change needed for this purpose?
I do not think so. There should be an indication from European political parties of a programme and a candidate. This is enough. The process should start in 2013, to have the new system in place already for the European elections in 2014.