Eijffinger: ‘Credit ratings agencies create unrest’

Credit-rating agency Standard & Poor’s will downgrade the credit status of most European countries. The Netherlands, France and Germany, among others, could lose its triple-A rating status because of the failure of leaders to resolve the debt crisis. Sylvester Eijffinger responds.

“The rating agencies follow the political developments and react, but in fact they lag behind the market,” says Sylvester Eijffinger, professor of financial economics at Tilburg University. “This way they strengthen the sentiment of the market. It only raises the financial turmoil. If one of the countries is downgraded, the interest on its public loans is likely to go up. ”

Agencies such as Moody’s, Standard & Poor’s and Fitch are companies that have an oligopoly on the market of credit rating. “They have no clear methods to assess credit, which makes the credit rating market not transparent. This is not good for the financial market. If the rating agencies would be more transparent and clear in in their rating methods it could benefit the financial market. But this way they only cause more financial unrest.”