E.U. Prepared To Set Up Own Rating Agency

European leaders are now in meeting in Spain to finish up the details of the new European Stabilizing Mechanism, that is to be presented later today. According to European sources the measures will include a ban of naked short selling of CDS – and the establishment of a new rating agency financed by the European Commission and the European Investment Bank.

“We will do whatever it takes to safeguard financial stability not only of Greece, but of all the euro area.”

José Manuel Durão Barroso


No official information about the details of the new European Stabilizing Mechanism has been given, but according to Der Spiegel and Financial Times Deutschland are a ban on naked short selling of CDS and establishing a new E.U. controlled rating agency among the measures that most likely will be presented Sunday.

While the crisis is spreading to Spain and Portugal, Jose Manuel Barroso, the president of the European Commission, blames “speculators” for the problems of the euro zone, showing once again that he, and those who advise him, have no understanding of the crisis, the eurointelligence.com writes.

Der Spiegel reports that Angela Merkel and Nicolas Sarkozy will push for their agenda of banning naked CDS, speculation against the euro, and the set-up of a European rating agency at today’s euro zone summit.

According to FT Deutschland, the European Rating Agency will be co-financed by the European Commission, member states, and the European Investment Bank, “to insure its independence” according to an MEP with a pronounced sense of humor.

The idea would be for member states to have to rely on two ratings, one from the European agency, and one from one of the private-sector agencies.

The long-term financing of the agency would be secured through the sale of rating to investors.

The Christian Democrats also support the idea, and even Trichet says it deserves further study.

Whatever It Takes

“We will do whatever it takes to safeguard financial stability not only of Greece, but of all the euro area,” president of the E.U. Commission Jose Barroso said in his statement last night.

And made the following pledge on behalf of the member states:

– First, what I could call a “Consolidation Pact”. We need deeper fiscal consolidation. Member States agreed to take additional measures for this consolidation and the Commission will implement the rules rigorously.

– Secondly, we will also immediately act to plug the gaps in our economic coordination. First the Commission will present a concrete proposal for a European Stabilisation Mechanism to preserve financial stability in Europe. This proposal the Commission will make will be presented to the ECOFIN meeting next Sunday, the day after tomorrow.

We also agreed to reinforce budgetary surveillance and to increase economic policy coordination. We will come with some proposals around these objectives next Wednesday, May 12.

– Thirdly, we will urgently complete financial market reforms. This was already mentioned in detail by President Van Rompuy in terms of the communiqué that is now available to you.

“The important point common to all these agreed elements today is that we will defend the euro whatever it takes. We have several instruments at our disposal and we will use them. The European Institutions – Council, Commission, European Central Bank and of course the Euro area Member States. This was the clear decision unanimously taken today,” Mr. Barosso said.

*

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