Posted on 10/20/2011 2:00:33 PM PDT by reaganaut1
BRUSSELS—The European Commission is leaning toward proposing a ban on the issuing of sovereign credit ratings for countries in bailout talks, a top official said on Thursday.
"I think it's legitimate to have a special treatment when a country is in negotiation or is covered by an international solidarity program with the IMF or a European solidarity" program, said Michel Barnier, European internal market commissioner.
Should the commission, the executive arm of the European Union, come to view these sovereign ratings are inappropriate, "we could ban it or suspend the rating for the necessary time frame," he said. "I am studying this matter very seriously."
The EU is set to make a fresh round of proposals on tightening rules for credit-rating firms on Nov. 9.
More
MarketBeat: The "I Can't Hear You" Approach The 27-nation bloc has been tightening rules on ratings firms since the financial crisis began, with EU officials blaming them for helping to cause the crisis and criticizing some recent rating decisions.
On Thursday, Standard & Poor's said it would likely downgrade the ratings of France, Spain, Italy, Ireland and Portugal if the euro zone slips into another recession, which many economists say they believe is likely.
Mr. Barnier had indicated previously that he liked an idea—originally proposed by International Monetary Fund chief Christine Lagarde when she was France's finance minister—that the EU should prevent ratings for bailout countries. However, it had been unclear whether he would push for them to be included in the November proposals.
On Thursday, ratings firms said the policy would prove much more disruptive to the markets than any rating could.
A spokesman for Fitch Ratings said "it would be a disturbing trend were the commission to begin restricting market opinions it deems politically unhelpful."
(Excerpt) Read more at online.wsj.com ...
‘Shooting the messenger’ is a time-honored European tradition....
This should clearly inspire confidence.
The market will rate the countries debt whether the EU bans rating agencies from downgrading or not. In fact, the law of unintended consequences would indicate that the moment the EU bans Moodys, S&P, Fitch, etc, from downgrading a particular countries credit rating, the interest rate on that countries debt will skyrocket.
If the rating agency downgrades one of two notches, the credit markets give the proper weight to that move. If the EU bans the credit agencies from downgrading, the uncertainty of how bad the situation is will cause the market to fear the worst and make the jump in rates even higher than they would ordinarily be after a downgrade.
Divine
Right?
This tactic is almost as smooth as reducing fuel use while flying in mountainous areas by ignoring the Field Elevations.
Bet it took a couple of months’ worth of high-powered meetings to arrive at this jewel of blithering idiocy.
How do they propose to implement this? What are they going to do to stop Moody’s or S&P from issuing a rating in spite of their little diktat? Will the send Eurozone troops to NYC?
I really hope they try this. I really do. It’ll collapse Euroweenie credit ratings over night.
Lying always works.
Lets not fix the problem, lets just not talk about it and it will go away.
lol
I think S&P, Moodys, Fitch, etc. should issue a press release stating that they will not longer rate sovereign junk bonds from EU countries.
That these people can even talk like this with a straight face shows they are doomed.
This is like trying to reason with my bipolar SIL. She believes that if you pretend something isn’t there, it ceases to be there.
The leaders of the EU are mentally ill. And they are sucking everything into their alternate universe.
“EU Considers Temporary Bans on Sovereign Ratings”
Just a little more overt, on what’s already happened worldwide. Oh how they’d love to have a “temporary ban” on the U.S. vote on the upcoming elections. The vote, the only thing holding them back now.
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