Outlook "Don't shoot the messenger." That is how one might summarise the response of the credit ratings agencies to the torrents of abuse hurled their way yesterday bygovernment officials in Greece and Portugal – on the wrong end of pronouncements from the agencies in recent days – as well as leading figures in Germany and the European Commission.
It certainly would have been better to complain about the power wielded by the big ratings agencies at a different moment. By attacking Standard & Poor's, Moody's and Fitch so soon after they have stuck a spanner in the attempts to defuse the eurozone sovereign debt timebomb, the Commission had made it straightforward for people to write off their arguments as sour grapes.
Moreover, in the case of the downgrades seen in Greece and Portugal this week, it is difficult to disagree with what the ratings agencies have had to say. Their verdicts on both countries may have been deeply unhelpful for all those involved in trying to resolve the crises, but that is not the responsibility of the ratingsagencies: their clients pay them to provide accurate and up-to-date assessments of creditworthiness, however inconvenient those findings prove to be.
What really seems to have upset the German government is the idea that the markets trust the judgements of the ratings agencies more than that of the "troika" – the European Commission, the European Central Bank and the International Monetary Fund – that has been co-ordinating the response to the eurozone crisis.
One can see the point – theratings agencies let themselves down spectacularly badly during the credit crunch. Still, the Commission and the ECB, at least, hardly have a spotless record: in Portugal, Ireland and Greece, their response has been the same – to deny the scale of the problem, only to be dragged kicking and screaming into a bailout months or even weeks down the line. Complacent does not begin to describe it.
The truth is that there is no easy answer to this difficulty. Investors need expert advice on credit risk from professionals. The three dominant providers do wield extraordinary power by virtue of their grip on the market, but that is not to say they do not have competitors – both in the West and, increasingly from developing markets. If their judgements prove wanting again, those competitors may begin to gain market share.
One idea floated in the past by some in Europe was for a new EU-backed credit ratings agency, but it is not clear how that would help. If it were to back the views of the Commission, it would struggle to win credibility. If not, presumably it would find itself the subject of the same complaints as the existing players.
In the end, if eurozone members want to stop finding themselves on the wrong end of downgrades and reviews, they will have to come up with more convincing responses to the current crisis than they have managed so far.