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.”
To arrange an interview with Prof Philip Booth, IEA Editorial Director, please contact Ruth Porter, Communications Director, 077 5171 7781, 020 7799 8900, firstname.lastname@example.org 
Notes to editors
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.