ECB member slams ratings agencies
The top ratings agencies are "subject to flagrant conflicts of interest" and competition is needed to make the sector more effective, a member of the European Central Bank's Executive Council said in an interview published Sunday.
"It is a very serious problem that we have with the rating agencies," Jose Manuel Gonzalez-Paramo told the Spanish regional newspaper La Voz de Galicia.
"They can be bad or very bad in their recommendations, as has been demonstrated with their performances in recent years, and take no responsibility.
"They are also subject to flagrant conflicts of interest. Today they are still wrong, basing their analysis not only on facts but also on pure conjecture, with partial information."
His comments came after Standard & Poor's cut the US rating for the first time ever on Friday, by one notch from its top-flight triple-A to AA+, saying US politicians were increasingly unable to manage the country's huge fiscal deficit and debt.
The agency put the rating on a negative outlook, warning there was a chance the it could be downgraded further within two years if progress is not made in balancing the country's lopsided finances.
Fellow ratings Moody's and Fitch both maintained their AAA ratings.
White House and Treasury officials accused S&P of making a $2 trillion error and misreading basic data.
Asked about the possibility of creating European ratings agencies to provide competition for the big three, Gonzalez-Paramo said: "It is possible and desirable to have many agencies and that there is competition, which is not now the case."
He also defended the ECB's decision to raise interest rates to 1.5 percent in July despite market turmoil, saying the inflation rate was 2.5 percent in the eurozone, "implying that interest rates are negative in the short term and that monetary policy remains accommodative."
EU leaders and officials have been highly critical of the ratings agencies, which have progressively downgraded weaker eurozone members as the debt crisis has deepened, saying they were only making things worse and not recognising all the measures being taken to remedy the situation.
© 2011 AFP