Well, this would certainly sex up the ECB’s reputation for greyness: turn the Bank into Europe’s very own sovereign ratings agency.
But would it do anything to keep the Moody’s wolves from Greece’s door?
From Wednesday morning’s Handelsblatt:
A report produced for EU finance ministers will show that the ECB should build its own country rating for European states, so that it no longer has to rely on the credit checking of Moody’s, Standard & Poor’s and Fitch.
‘The agencies got the case of Lehman totally wrong. Who says they won’t do it again?,’ it has been said in EcoFin circles…
(H/T Tracy Alloway for the [self-admittedly poor] translation)
Make no mistake: this is about the Club Med car-crash of the hour — although it’s also a bit of a curio for the ECB’s liquidity exit strategy.
Since S&P and Fitch have already kicked Athens into the B corner, Moody’s A2 rating is the Damoclean sword hanging over the use of Greek bonds as ECB collateral in the future. The Bank still plans to revert to A- as its minimum rating for collateral in 2011, of course. Adieu to that exit strategy, if Greece can’t be brought to the party.
Even before then, a downgrade could well be the signal that frightens markets — oh, and most of the German public — off Greece’s emerging bailout in the here and now. And just when it was all going so well.
All of which leads FT Alphaville to wonder if this is a short-term EcoFin warning shot to Moody’s against a downgrade — no actual ECB input into the ratings agency idea necessary. (The ECB declined to comment on the Handelsblatt story).
Indeed, a general lockdown on the Greek bailout seems to be emerging elsewhere, what with European short sellers being beaten up by regulators, and inquiries aplenty into sovereign CDS in the offing.
And after all — could the ECB really house its own ratings agency without, you know, utterly massive conflicts of interest to its liquidity operations?
Related links:
Nowotny talks contagion, exit strategies and all things peripheral with FT Alpha – FT Alphaville
S&P avoids the dreaded ‘M’ word on Greece – FT Alphaville