Ratings agencies should not amplify crisis
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Xinhua, January 14, 2012
France was stripped of its triple-A credit rating on Friday in a swathe of downgrades in the eurozone, which dealt a blow to the eurozone members faltering in the debt crisis.
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Countdown [By Zhai Haijun/China.org.cn] |
France has been struggling to secure its top-notch rating for months. After several rounds of austerity packages and a massive economic overhaul, its overstretched public finances showed no clear signs of easing up.
From this perspective, S&P's downgrade is legitimate in some sense, but the timing is dubious.
Just one day ago, European shares and the euro rose on positive comments on the region's outlook from the European Central Bank and the news of a successful Spain's bond auction.
Meanwhile, ten-year bond spread of debt-ridden countries over that of German has also narrowed overtime, a key measure of investors confidence.
Spain, Italy and some peripheral countries have waken up to the severity of their structural flaws and introduced a flurry of financial measures to boost their productivity.
As crisis is showing tentative signs of receding, the S&P's overwhelming downgrade has once again weighed on the market and dented investors' confidence.
Having an estimated 95 percent of the global market for credit rating, the three ratings agencies - Moody's, S&P and Fitch Rating, played a pivot part in providing assessment of the ability of countries and companies to pay their debts.
For this reason, it is of great importance for them to be objective and professional in analyzing the market situation. Otherwise, their incorrect information on the credit risk will inflict catastrophic consequences on the global market.
The 2008 financial crisis has provided such a cautionary tale. It is the failure of ratings agencies to assess some risky financial products that contributed to the spread of the toxic assets and fuelled the global crisis.
Meanwhile, investors and markets should wane their over-reliance on assessment of the credit ratings agencies and make their own judgements about the market situation.
With great power comes with great responsibility. In this connection, the ratings agencies should use their power with caution to avoid becoming an ominous amplifier of the ongoing sovereign debt crisis in Europe.
As global investors should be warned about the major risks of the European debt mess, ratings agencies should also do their honest job and not repeat their past mistakes to win back the trust of global investors.
