What the Germans are playing at I have no idea. Mrs Merkel must know that the EFSF, at 424 billion (I don't have a Euro sign on my QWERTY), is nowhere near big enough, and that some way must be found to increase it. Whether the ways proposed will work (making the EFSF guarantor of the first 20% of losses is unlikely to satisfy bond purchasers numerate enough to wonder what might happen to the remaining 80% of their money) is another matter.
Now no-one much likes the credit ratings agencies (although I don't remember people complaining about them when they were giving the go ahead for the West's enormous borrowing spree), but this is shooting the messenger. All the ratings agencies do is provide the financial markets with information. They are agents of transparency. What would M. Barnier prefer? That bond investors make decisions on rumour or innuendo instead? Does he really think that in a climate where the default position of investors is that a country might not be able to pay its bills, reducing the amount of information available will help to lower bond yields and make it easier for cash-strapped governments? I find it hard to believe, but apparently he does.
As if to confirm the tenuous grasp on reality held by European leaders, the Grauniad this morning reports one Michel Barnier, EU internal market commissioner, as saying "Credit rating agencies could be banned from downgrading countries in the eurozone's bailout scheme . . . " The report goes on, "Presenting his proposals to reform trading in financial derivatives on Thursday, Barnier suggested the ban could be extended to downgrades of countries negotiating to join the bailout."
Now no-one much likes the credit ratings agencies (although I don't remember people complaining about them when they were giving the go ahead for the West's enormous borrowing spree), but this is shooting the messenger. All the ratings agencies do is provide the financial markets with information. They are agents of transparency. What would M. Barnier prefer? That bond investors make decisions on rumour or innuendo instead? Does he really think that in a climate where the default position of investors is that a country might not be able to pay its bills, reducing the amount of information available will help to lower bond yields and make it easier for cash-strapped governments? I find it hard to believe, but apparently he does.
This is pretty symptomatic of the way the EU has handled this crisis. The facts are inconvenient? Ignore them. Actually no. Better still. Stop their publication.
