Back in November US ratings agency Standard & Poor’s sent a note to online subscribers saying it planned to lower the credit rating of France from its much-prized AAA – only it didn’t. A not very chastened S&P described it as a “technical error.”
Now the agency has announced that it is considering downgrading all the Eurozone countries (including France and, mein gott, Germany but not, bizarrely, Greece), so 16 of them, if they fail to come up with what UK PM David Cameron stupidly called a ‘big bazooka’ to fix their problems at a summit this Friday.
And the end result of this quite staggeringly foolish and tactless announcement is that world stock markets have gone into sharp reverse this morning following a week of gains. So we’re all that bit poorer thanks to dear old Standard & Poor’s.
The big ratings agencies – S&P, Moody’s and Fitch – are still in the doghouse over their borderline criminal rating of US sub-prime mortgage packages as AAA when even the banks issuing them could see they were a pile of pooh. So you’d think they would be a little more cautious when making, in effect, political as much as economic prognostications.
What will be the upshot of S&P’s musings? A lot of very angry politicians in Europe for starters, who are already threatening to circumscribe their activities and even launch rival European-owned ratings agencies.
But there’s a more important underlying trend in the eurozone crisis. Banks, traders and credit agencies (mostly US-owned) don’t seem to understand that, grinding away very slowly admittedly, fundamental change to the way the EU works requires political agreement among up to 27 countries (including non-eurozone members) and that this can take a bit longer than some Wall Street smart asses (who got us into this mess in the first place) hope or expect.
And S&P (owned by publisher McGraw-Hill incidentally), which is supposed to be a beacon of calm judgement in these trying times, is busy stirring the pot with a very large spoon.
Does the company have a PR director?
This blew my mind last night. What is wrong with these people? Poor old Merkozy must have been livid, they had just managed to create a shred of positivity and then these geniuses do this.
Furthermore, why does anyone listen to them after their previous fiascos?