Written by In relation to the push for a bail-out for the Irish banks, and the activity on the bond markets which led to this process, it has been argued that the various international credit rating agencies – Moody’s, S&P and Fitch – have played a central and controversial role in the European bond market crisis. As with the housing bubble and the Icelandic crisis, the role of these ratings agencies has been questioned. EU Government officials have criticised these with the German finance minister has said traders should not take global rating agencies "too seriously" following downgrades of Greece, Spain and Portugal. Guido Westerwelle, German foreign minister, called for an "independent" European rating agency, which could avoid the conflicts of interest that he claimed US-based agencies faced. According to the Financial Times ‘The latest furore over the agencies’ role in the sovereign debt market,’ is likely to bring about more supervision of these same agencies. Germany’s foreign minister suggested the European Union should create its own rating agency. This was after the downgrades of Greece and Portugal affected financial markets.
There has been controversy about the role of the English-language press in the regard to the bond market crisis. Spanish Prime Minister José Luis Rodríguez Zapatero directed the Centro Nacional de Inteligencia intelligence service to investigate the role of the "Anglo-Saxon media" in fomenting the crisis. According to the Madrid daily El País, "the National Intelligence Center (CNI) was investigating ‘whether investors’ attacks and the aggressiveness of some Anglo-Saxon [sic] media are driven by market forces and challenges facing the Spanish economy, or whether there is something more behind this campaign.’" The Spanish Prime Minister has suggested that the recent financial market crisis in Europe is an attempt to draw international capital away from the euro in order that countries, such as the U.K. and the U.S., can continue to fund their large external deficits which are matched by large government deficits. The U.S. and U.K. do not have large domestic savings pools to draw on and therefore are dependent on external savings. This is not the case in the Eurozone which is self funding.
Greek Prime Minister Papandreou was quoted as stating that there was no question of Greece leaving the euro and suggested that the crisis was politically as well as financially motivated. "This is an attack on the eurozone by certain other interests, political or financial". Financial speculators and hedge funds engaged in selling euros have also been accused by both the Spanish and Greek Prime Ministers of worsening the crisis. Angela Merkel has stated that "institutions bailed out with public funds are exploiting the budget crisis in Greece and elsewhere."
The role of Goldman Sachs in Greek bond yield increases is also under scrutiny. It is not yet clear to what extent this bank has been involved in the unfolding of the crisis or if they have made a profit as a result of the sell-off on the Greek government debt market. In response to accusations that speculators were worsening the problem, some markets banned naked short selling for a few months.
Source:
2010 European Sovereign Debt Crisis
http://en.wikipedia.org/wiki/2010_European_sovereign_debt_crisis
