Merkel Criticizes Rating Agencies

[Monster]

Introduction: Rating agencies on the financial markets that provide credit ratings for countries have come under criticism from various directions. The most recent case is that of Greece that had increasing trouble getting loans b/c of the low rating of their country by rating agencies. The IMF, the ECB and the EU have tried to help Greece to get loans to keep the economy running. Greece is facing national bankrupcy.

The ZDF has an interesting article about German chancellor Angela Merkel and what she said about the issue. (German -- unfortunately Google translator cannot translate ZDF articles)

Here's a short excerpt, translated manually:

Angela Merkel said on Tuesday in Berlin that the EU commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) should not let their own ability to make judgements be taken away. She said she chiefly trusts the judgment of these three institutions.

The rating agency Standard & Poor's (S&P) had warned on Monday that the French sharing model for private creditors to the Greece support package could be interpreted as bankrupcy of the country.

---------

I personally think it's an important development.

 

[Monster]

In related news, the tagesschau posted an article about the current trial before the German Constitutional Court about the financial aid packages for Greece and other countries (Google-translated).

 

[el canadiano]

To be fair, it's hard on Germany to be paying for Greece just because they're doing so well while Greece is sort of deteriorating.

 

[Monster]

We have a similar regulation inside Germany that richer federal states support the poorer ones ("state finance compensation").

Most people here do want to help Greece (and other EU countries), but the sums of these aid packages are astronomically high (in one instance, € 22.4 billion for Greece, and in another, € 147.6 billion for the European Financial Stabilization Mechanism). Our federal constitutional court will now check whether the whole matter is legitimate and what solution could be chosen alternatively, if not. When the rating agencies rated down Greece, our politicians were quick to jump in and offer help, without considering the legal status and ramifications of such offerings.

Since the Euro currency was introduced in 2002, there have been increases in inflation, pricing and taxation. For instance, food is roughly twice as expensive as before, and tobacco tax has risen so much that a pack of cigarettes costs over € 5 (also a doubling of the price). Same for fuel. People feel a drop in standard of living from 30-60%, because while in the rest of the EU, salaries have increased, in Germany, they haven't.

 

[el canadiano]

We have a similar regulation inside Germany that richer federal states support the poorer ones ("state finance compensation").

Most people here do want to help Greece (and other EU countries), but the sums of these aid packages are astronomically high (in one instance, € 22.4 billion for Greece, and in another, € 147.6 billion for the European Financial Stabilization Mechanism). Our federal constitutional court will now check whether the whole matter is legitimate and what solution could be chosen alternatively, if not. When the rating agencies rated down Greece, our politicians were quick to jump in and offer help, without considering the legal status and ramifications of such offerings.

Since the Euro currency was introduced in 2002, there have been increases in inflation, pricing and taxation. For instance, food is roughly twice as expensive as before, and tobacco tax has risen so much that a pack of cigarettes costs over € 5 (also a doubling of the price). Same for fuel. People feel a drop in standard of living from 30-60%, because while in the rest of the EU, salaries have increased, in Germany, they haven't.

It's tough. The EU was more of a political idea than an economical one. In one sense, I actually really appreciate that guys like Germany are there to back Greece up, but economically, it's guys like Germany who lose.

But either way, it's in Germany's interests to help Greece anyways, as they are a trading partner. Welcome to the global economy, you know. It's in the interests for everyone to be doing well for a good reason.

 

[Monster]

It's tough. The EU was more of a political idea than an economical one.

Actually, the EU (European Union) was formed from the EC (European Community). ( See History of the European Union )

The EC and the organizations before mainly served as trade organizations. So the foundations of the EU were primarily economical.

The political union of the EU is still a work in progress. Some countries don't appear to like the idea of a political organization instead of a mainly economical one.

In one sense, I actually really appreciate that guys like Germany are there to back Greece up, but economically, it's guys like Germany who lose.

IIRC, Wolfgang Schäuble put it this way: Without the European Monetary Union (the Euro currency), what we'd have then -- namely, isolation -- would be far worse than helping countries like Greece that are currently in trouble. B/c a financially powerful EU benefits all of the EU.

But either way, it's in Germany's interests to help Greece anyways, as they are a trading partner. Welcome to the global economy, you know. It's in the interests for everyone to be doing well for a good reason.

You're carrying owls to Athens, so to speak -- there have been trade unions between EU countries since after WWII.

The idea of a unified Europe is at least 500 years old, and finally, after WWII, with the willingness to live in peace, and the insight that to live in peace and in economic union has far more benefits than constant warfare, it finally became a reality.

 

[leon ice]

S&P is playing hard now. Look what they did to the US market? Why haven't they done something when wars started and it was clear that deficit is going to be a problem? This is a biggest BS, "drive down the market so we can buy it low" tactic used even 150 years ago by train barrons.