Architects of all their own bad luck

Even the most rational of all Europeans now think Friday 13th is an unlucky day.Although the talks could resume, it will dramatically increase the chance of default is disorderly Greek.

Later in the day, Standard & Poor, the big three credit rating agencies, downgraded nine of the 17 euro area economies.is.

Euro area countries, S & P, and other agencies have been downgrading their economies to injustice, criticism.But it does not wash as a three largest Fitch, a French company owned by 80 percent.
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And disability and the big three global financial crisis of 1997 and 2008 Asian financial crisis dramatically exposed more to cynicism, there are good grounds to doubt his decision.

However, euro area countries to realize that the group's Friday the 13th bad luck was in no small part to their own needs.

First, downgrading the core euro area adjustments under austerity-driven countries, especially Germany, have been on the periphery economies is a very outstanding. Rating agencies have often pointed out, austerity economic growth, which reduced the growth of tax revenue, the budget deficit problem reduces to the more intractable. Healthy economies also drags down the resulting financial turmoil, which is just what we saw.

Greek debt negotiation policy action in the break-even partially is due to the Euro zone.

On top of that, the euro area countries to understand why the rating agencies need to keep returning to haunt them.

First, this period is a financial regulatory structure that is highly dependent on credit rating agencies have been established. If the capital bases of financial institutions, which determine their ability to lend by weight, measure their own property by their respective credit rating. We also demand that some financial institutions (like pension funds and insurance companies) with assets below a certain minimum credit ratings can not. All well-intentioned, but it's no big surprise that rating agencies such as the regulatory structure makes the most impressive.

Americans have really cottoned to the problem and reduce the regulatory system Dodd - Frank Act made on the credit rating, but European regulators have failed to do the same. It's no good complaining that rating agencies are very powerful, while keeping in place all the rules that make them so.

The most fundamental, and as it could not see whites as well as Americans, our financial system and the increasingly complex nature of long distance has increased our reliance on rating agencies.

In the old days, some attached to a credit rating agency is worried because they dealt with what they knew. Banks and companies that they knew or local houses, whose behavior they can easily understand the fast, even if they did not know them personally. Most people, companies and governments in their own currencies to buy financial products.To make it worse, the products are often complex, are made whole through financial engineering. That rating agencies - tell us how our financial operations are risky as a result, we have become increasingly dependent on someone else.



Budget deficit, sovereign bankruptcy and financial reform issues without a radical rethink on the continent is doomed to a prolonged period of turmoil and stagnation


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