- Article Information
- Category: August 2011
- Created on 16 August 2011
- Article Information
- Category: August 2011
- Created on 09 August 2011
The president of the European Central Bank, Jean-Claude Trichet, has devoted the last three decades of his distinguished career to building a solid currency for Europe. Now, three months from his retirement, Trichet, 68, is waging what seems to be the fiercest struggle of all as he strives to prevent a collapse of his prized euro.
- Article Information
- Category: August 2011
- Created on 02 August 2011
The U.S. finally chalked up a success in reaching a Congressional deal to avoid default on the national debt, but considerable “damage may already have been done” to America’s image as a global pillar of financial security and adept manager of economic power.
- Article Information
- Category: July 2011
- Created on 28 July 2011
Rhetoric about the debt threats sounds similar on both sides of the Atlantic, focusing on political leaders’ apparent inability to cope with the crises. In fact, the resemblances and comparisons are superficial, argues prominent economist Simon Johnson in a trenchant article entitled: “Who Is In Worse Shape – The United States or Europe?”
- Article Information
- Category: July 2011
- Created on 26 July 2011
The recent events in the eurozone have raised questions about the appropriate role of independent credit ratings in the financial system and prompted a flurry of suggestions from European policymakers, from intervening in ratings methodologies to suspending certain sovereign ratings.
The bigger question for the financial system is how ratings are used by regulators and policymakers. Their reliance on ratings in determining regulatory and policy decisions may be encouraging excessive focus on rating agency opinions.
Deven Sharma – president of Standards & Poor’s – explores the right way to use the agencies in a July 25. Financial Times article that you can read here (or here). What is needed, according to Sharma, is a more thoughtful way to reduce what some perceive as the excessive influence of ratings in financial markets and the financial policy process.
He says that rating agencies do not claim to be the sole voice expressing reasoned views about the future. (The Federal Reserve appears to agree as it said on Monday (25 July) that the U.S. government is trying to reduce any undue reliance on credit ratings.)
The head of S&P believes that a better approach is to drop regulatory mandates to use ratings and avoid making ratings the sole criteria for policy decisions. That would reduce their impact on markets and on public policy. And it would free rating firms to compete entirely on quality. Investors, in turn, would have the discretion to choose which are useful and which are not, without being compelled to refer to particular benchmarks by regulatory or policy measures.
Standard & Poor’s is a subsidiary of McGraw-Hill Companies – a corporate member of the European Institute.
Perspectives is an occasional forum of The European Institute reflecting member views on topical issues.
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