Limitations on ratings agencies would be shooting the messenger

Prof Philip Booth comments on the latest EU proposal

EU Commissioner Michel Barnier has suggested that, in certain circumstances, ratings agencies may be prevented from downgrading the debt of EU countries.

Commenting on the proposal, Prof. Philip Booth said:

"Perhaps the most pernicious aspect of this proposal is the suggestion that a negative opinion on the creditworthiness of a government that has imposed huge debt obligations on its citizens cannot be published in certain circumstances. This would make governments less accountable to the people and is an inhibition on freedom of speech. A ratings agency simply brings bad news – or expresses a negative opinion – on an underlying reality. This would be a classic case of shooting the messenger.

“Although ratings agencies have been raised upon a pedestal by the use of their ratings for regulatory purposes, thus grossly distorting the market, the EU should remember what the basic function of a ratings agency is.

“Ratings agencies simply give opinions on the creditworthiness of borrowers. This suggestion would lead to the EU effectively banning the publication of such opinions if they are negative. This will have undesirable consequences for the liquidity of EU government debt and, ultimately, for the cost of borrowing.”


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