There is a widespread belief that rating agencies have never acknowledged the financial pain they inflicted to the euro zone. S&P, Moody’s and Fitch overly aggressive downgrades of Spain, Portugal, Ireland, Greece and Italy caused waves of selling of government debt raising these countries’ borrowing costs and crippling their public finances in the worst period of the economic crisis. Were these downgrades reckless?
According to Italy’s Corte dei Conti, they might have been, indeed. The institution with the constitutional role of “safeguarding public finance and guaranteeing the respect of the jurisdictional system,” as the Financial Times (that broke the news) described it, is considering whether the Big Three did any wrong by not considering Italy’s patrimony. The vast richness of monuments and art in the country, such as the Coliseum or the Sistine Chapel, should be part of its sovereign value, the auditor says.
The potential legal claim could go up to €234bn, the biggest so far, against the trio. And it raises crucial questions:
-What if Spain, Italy, Ireland, Portugal or Greece joined in?
-Many EU officials blame the rating agencies for accelerating the European sovereign debt crisis and showing preferential treatment to the U.S. Shouldn’t the authorities defend their members with specific legal action? What about national institutions in Spain or Greece? Aren’t the Parthenon in Athens or Granada’s Alhambra global cultural treasures, too?
-And, again, isn’t it time to review rating agencies’ practices, since the Big Three hold roughly 95 percent of the market and their say has enormous implications for investors and global markets?