Ambrose Evans-Pritchard has been on sabbatical for the first half of 2011, and his absence was sorely missed.
Evans-Pritchard has made up for his time away, returning with a scathing attack on the EU's attempts to muzzle the ratings agencies.
Before we all join the chorus of abuse against the robber agencies, let us not lose sight of what is happening in the eurozone. The EU authorities are attempting to muzzle free opinion, first by threatening Fitch, Moody’s, and S&P with vague retribution, and then by drafting restrictive laws to prevent them from publishing unwelcome messages.
It is financial repression, pure and simple. The same will be done to the press in due course. Then to you, dear reader.
Apparently this financial repression is voluntarily adhered to by these same ratings firms when it comes to rating US federal and state debt.
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What should have been done is obvious. The EU’s bail-out fund should have been given powers mop up the bonds of countries in distress on the open market at a hefty discount (as the ECB suggested). Investors would have suffered condign losses, and the EU could have given Greece debt relief by retiring bonds with no net loss to European taxpayers.
This elegant solution was blocked by Germany because it was seen as a slippery slope towards a Transfer Union, and might have violated the Grundgesetz. (In a sense the Germans are right, but you shouldn’t join a currency union in the first place if don’t realize that it implies fiscal union.)
Now, if the EU institutions wish to avoid being held hostage by the robber agencies they should stop using the ratings as a basis for lending collateral at the ECB. They should create their own more rigorous method of assessing credit-worthiness, ignore the agencies altogether, and make their case directly to global investors.
What the EU should not do is try to muzzle free opinion, or free speech. We are on a slippery slope.
Click here for more of AEP's Europe, Free Speech, and the Sinister Repression of the Ratings Agencies
