Panama Papers showed vulnerability of whole system: Panama president

Yahoo – AFP, May 3, 2016

Panama's President Juan Carlos Varela delivers keynote address at a luncheon
during the Washington Conference on the Americas at the State Department on
May 3, 2016 in Washington, DC (AFP Photo/Mandel Ngan)

Washington (AFP) - The scandal triggered by the Panama Papers leak of information on how and where the world's wealthy stash funds to avoid detection or taxes underscored many countries' vulnerabilities, President Juan Carlos Varela said Tuesday.

Speaking at the State Department in Washington, the Panamanian president said the documents "reveal a worldwide problem, that involves many countries with legal and financial institutions" vulnerable to actions "that are not in the public interest."

Mossack Fonseca's founder lawyer Ramon

 Fonseca is a friend of Panama's President 

Juan Carlos Varela (shown here) and, until 

March, served as a senior advisor in his 

cabinet (AFP Photo/Rodrigo Arangua)

To that end, countries need to improve transparency and information sharing, Varela argued.

"We urge the international community to maintain a respectful dialogue through diplomatic channels," he added.

Panama and the United States last week signed an agreement on sharing of back account information in a step Panama's finance minister hailed as proof of his country's cooperation in fighting tax evasion.

The bilateral agreement comes weeks after the Panama Papers, a series of reports around the world revealing how one Panamanian law firm set up offshore entities to help the world's wealthy stash their assets.

Following the revelations, Panama has come under intense international pressure to open its financial sector to greater transparency or risk being put back on a global "tax haven" blacklist.

While the government has long said it is committed to that goal and has made some reforms in that direction, it has so far not signed up to an international standard on automatic sharing of tax information set by the Organisation for Economic Cooperation and Development.

Panama's President Juan Carlos Varela, left, sits with Singapore's President 

Tony Tan, right, for a meeting at the Istana or presidential palace on Friday, 

April 22, 2016, in Singapore. (AP Photo/Wong Maye-E)

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UN climate conferences agrees on draft deal in marathon session

Negotiators at UN climate talks in Lima, Peru, have approved a draft laying out the key points for a global climate pact set to be agreed in Paris next year. The agreement came in a marathon overtime session.

Deutsche Welle, 14 Dec 2014

Delegates to a United Nations climate summit in the Peruvian capital, Lima, on Sunday approved the building blocks of a global climate agreement at talks that ran into the early hours of the morning.

The deal, called the "Lima Call for Climate Action," sets out the format for national pledges to cut carbon emissions that will be at the heart of the global pact, which is due to be adopted in Paris in December 2015.

The delegates at the two-week conference also agreed on the broad outlines for negotiations leading up to the deal.

The agreement came after delegates rejected a previous draft deal that developing countries said would take too much responsibility for global warming away from rich nations. The approved paper represents a major compromise that attempts to bridge the rift between rich and poor countries.

Developed countries want the pledges to center on measures to cut emissions, while developing nations want richer countries to take on more financial responsibility for damage caused by climate change, for example in small island states at risk of being flooded by rising seas.

Ineffective compromise

Climate campaigners say the watered-down nature of the deal could have a negative impact on the effectiveness of the prospective Paris agreement, which is envisioned as the most ambitious accord in environmental history. The pact would be the first to bring all the countries of the world together in coordinated efforts to combat climate change by curbing greenhouse gases.

The aim of the pact is to limit global warming to no more than two degrees Celsius (3.6 degrees Fahrenheit) over pre-industrial levels in a bid to slow or stop a process that could lead to catastrophic climate change by the turn of the century.

In the past, Western nations have been responsible for most greenhouse-gas emissions, but they have been since overtaken by developing nations growing their economies.

Scientists have pointed to rising sea levels, intensifying heat waves and a higher incidence of floods and droughts as indicators that global warming is already having an impact on the global environment.

Last week, the UN weather agency said that 2014 could become the hottest year on record.

tj/es (AP, AFP)

Ireland is to close a tax loophole used by Apple

BBC News, 15 October 2013

Apple has been criticised for its tax arrangements

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Ireland plans to shut a tax arrangement used by Apple to shelter $40bn (£25bn) from taxation.

Apple, and other firms, have been able to funnel profits into Irish subsidiaries or "ghost companies" that had no declared tax residency anywhere in the world.

On Tuesday, the Irish government said it planned to make it illegal for a company to have no tax domicile.

But firms would be able to nominate any country as their tax residence.

That includes countries such as Bermuda which offer zero tax rates.

Because of that, tax experts say that the change announced on Tuesday will not make much difference to the amount of tax paid by Apple.

Google and Microsoft have Irish subsidiaries that legally channel money to Bermuda where they pay zero tax.

But Ireland's Finance Minister Michael Noon said his country was committed to reform.

"Let me be crystal clear. Ireland wants to be part of the solution to this global tax challenge, not part of the problem," he said.

Back in May, a US Senate committee said Apple had used "a complex web of offshore entities" to avoid paying billions of dollars in US income taxes.

Google, Microsoft and Apple say they follow tax rules in every country where they operate.

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Brazil Congress backs oil royalties bill

BBC News, 15 August 2013

Brazil protests

• Brazil leader plays hand over protests
• Scarred Brazil hopeful for 2014
• Wrestling with unrest
• Contain mentor contagion?

Some of the largest oil finds in recent
years are off the Brazilian coast

Brazil's Congress has approved a bill that designates all royalties from newly discovered oil fields to education and healthcare.

The bill, which had already been approved by Senate, was passed by the lower house on Wednesday.

The move is one of several reforms proposed by the president in the wake of widespread protests sparked by a rise in transport costs.

Once signed by the president, the bill is due to come into effect next year.

According to the resolution, 75% of drilling royalties the Brazilian government receives from oilfields in the so-called "pre-salt" layer are to be invested in education and 25% on health.

The pre-salt area is so called because the oil and gas lies beneath several thousand metres of water, rock and salt off the Brazilian coast.

Demonstrations that rocked Brazil in June were triggered by transport fare rises, but quickly encompassed other issues including the cost of staging the 2014 World Cup and corruption.

The protests often ended in fighting between police and protesters.

The unrest prompted President Rousseff to present a package of investment and reforms in public services.

Demonstrations have grown smaller since June, but several took place in Brazilian cities on Wednesday including in Rio de Janeiro and in Sao Paulo.

In Rio, about 200 protesters tried to reach Governor Sergio Cabral's Guanabara Palace, demanding his impeachment and political reform.

The area was blocked off by police and officers used tear gas and rubber bullets after protesters tried to break through their lines.

Another protest was staged in Rio's Rocinha shanty town to mark one month since a bricklayer went missing after being held for questioning by police.

Last weekend, tens of thousands of workers across Brazil joined a day of strikes called by trade unions. They ended in clashes between police and protesters.

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"2013 - A Difficult Year" – July 14, 2013 (Kryon Channelling by Lee Carroll) - (Text version)

“… You Can See It In Your News

The final item is this: All around you, dear ones, is proof of what I'm telling you. You have two countries currently in turmoil at the moment, and a third one about to go. All three have been stable for a very long time. Who would have thought that Egypt would be part of this? Egypt seemed to be in balance for decades - or was it? Syria ruled itself with an iron hand and created a stability of power that was absolute. What would then cause these to erupt the way they did and at this time? If you take a look at why, and why now, you'll see the timing is all around 2013 and 2012. And it's around Human consciousness that is starting to be more transparent and saying, "We don't want what we now understand and see is continuing unbalance in our country. We see it never getting better, and now we want finality and we want resolution." That is what you're looking at.

It's ugly to look at this, for there is death, suffering, sorrow and turmoil. There is frustration, and the resolution of it all may take longer than you want it to. But someday you will look back and see the results clearly. Mass Human consciousness is starting to change and demand what it expects in the way of integrity. Governments often want the old ways of power, but their people want schools, hospitals, safe streets and parks, and peace with their neighbors.

So expect more of this, especially this year. The more turmoil you see, the more the puzzle is being worked with. So we close this message the way we started it. I know who you are, magnificent one. I sit at your feet in awe. Do not miss this point! Old souls have been here through all of the transitions of humanity. Do you understand that? Four times you came close to this shift you are today experiencing and four times you missed it. Four times you died in the process of trying. This time you didn't.

Do not miss this: There is something within your Akash, a "remembrance button", that is being pushed and plays an emotion that says, "We've felt this before and it didn't turn out well." Don't let this energy define you. It's the button of duality and fear that says things are always the way they are and they will repeat themselves because that's just the way life works. No it isn't! You are magnificent and you have the ability at this point to finally begin to see it, and to cast all the fears and the voices in the back seat of life and tell them you are in charge now and you are the one driving the car of your reality. That's the message of the day. ….”

Decisions must be made at Rio Earth summit, urges UN official

The summit must not be a talking shop for world leaders, says Brice Lalonde, UN executive co-ordinator of the conference

guardian.co.uk, John Vidal, Wednesday 11 January 2012

Heads of state and government gather for a group photograph as the media,
delegates and staff members look on at the United Nations Earth summit in
Rio de Janeiro, Brazil, on 13 June 1992. Photograph: UN Photo

The Earth summit in June must be the place where decisions on the future of the planet are made, and not just another talking shop for world leaders, the head of what will be 2012's largest political conference has urged.

Speaking as the first draft of the UN declaration for Rio+20 was released in New York on Tuesday night, Brice Lalonde, the UN's executive co-ordinator of the conference and former French environment minister, said: "[The draft] is a good start. Most topics are on the table: from efficient international co-operation to sustainable development goals, from a regular review of the state of the planet to an agency for the environment, from universal access to energy to social safety floors. What is missing now is one verb: to decide. Because to stress, urge, call, recognise, underscore, encourage, support or reaffirm is not enough. When heads of state meet, it should be to decide."

As revealed by the Guardian early on Tuesday, world leaders will be called on to sign up for 10 new sustainable development goals for the planet and promise to build green economies. They will also be asked to negotiate a new agreement to protect oceans, approve an annual state of the planet report, set up a major world agency for the environment, and appoint a global "ombudsperson", or high commissioner, for future generations.

John Major, Fidel Castro and George H W Bush were among the leaders who attended the original earth summit, which was the world's biggest ever political gathering. But David Cameron has said he is not planning to attend Rio+20, despite promising to lead the "greenest government ever" and the date of the summit being changed to avoid a clash with the Queen's diamond jubilee.

International groups on Wednesday reacted to the draft. Diana Bronson, a spokeswoman for ETC group in Canada, said: "The draft declaration calls for bold and decisive action and then offers weak and equivocal statements, reiterating commitment to the same old policies that have failed to deliver on sustainable development for 20 years. Alarmingly, business is called upon show leadership on the green economy – completely ignoring how well-entrenched and increasingly consolidated private interests have steered us away from sustainable development thus far. We need a clear commitment to support peasant agriculture and food sovereignty."

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EU warns Britain: financial rules apply to you too

Commissioner Olli Rehn says City of London will still be subject to regulation from Brussels

guardian.co.uk, Ian Traynor, Monday 12 December 2011

Olli Rehn: 'The UK’s excessive deficit and debt will be the subject of
 surveillance like other [EU] member states.' Photograph: Yves Herman/Reuters

The European commission on Monday underlined the negative impact of David Cameron's summit gambit by pledging that the City's financial institutions would be subject to new regulations hatched in Brussels.

Emphasising the EU's determination to dismiss Cameron's abortive attempt to secure exemptions for the City, Olli Rehn, the commission vice-president in charge of economic and monetary affairs, was scathing about the prime minister's campaign. This was rejected by the Brussels summit on Friday, triggering a British veto of German plans to anchor a new eurozone fiscal union in a renegotiated Lisbon treaty.

Cameron's move isolated Britain in Europe as seldom before, producing weekend headlines and comment across Europe that the UK was on the way out of the EU.

"We want a strong and constructive Britain in Europe, and we want Britain to be at the centre of Europe, and not on the sidelines," said Rehn, sounding more sorrowful than angry at what is seen in Brussels as Cameron's self-inflicted wound. "If [Cameron's] move was intended to prevent bankers and financial corporations in the [City of London] from being regulated, that is not going to happen. We must all draw lessons from the financial crisis, and that goes for the financial sector as well."

Launching a new set of economic convergence policies – known as the "six-pack" and which come into force on Tuesday – Rehn admitted that Britain's blocking of attempts to reopen the Lisbon treaty could create problems for the EU. Potentially, the move makes it legally more difficult to establish the eurozone's "fiscal compact" – the main result of last Friday's summit – by March.

Because of the British block, at least 23 and possibly 26 of the 27 EU states are now to agree a new international treaty among themselves as the answer to the eurozone debt crisis. The aim is for all eurozone countries to enact laws setting binding debt ceilings and with quasi-automatic penalties and fines for those countries breaking the rules. Germany, the architect of the new regime, wants to strengthen the key European institutions – the European commission and the European court of justice – giving them formidable powers of intervention in enforcing the new regime.

But on the central innovation – automatic fines for deficit sinners – Rehn conceded that it could be difficult to give the new regime as much clout as Berlin would like. The Germans want the commission to enforce the regime independently by recommending punishments for eurozone countries running excessive budget deficits. The penalty would be triggered automatically unless a qualified majority of eurozone governments then voted to overturn it. Rehn said the Lisbon treaty would need to be changed for this to happen – but it cannot be changed because of the British veto on Friday.

While eurosceptic Tory backbenchers may be pleased by the potential legal stalemate, the Cameron veto may be generating more unintended consequences. For months it has been British government policy to back EU efforts to stabilise the euro through an effective fiscal union. Cameron and the chancellor, George Osborne, have been stressing the "relentless logic" of fiscal union, supporting it strongly provided that Britain is not involved. Britain's veto and its resistance to having EU bodies involved in policing the fiscal compact could leave the new regime weaker, setting back attempts to stabilise the euro, which Britain says is also crucial for the UK economy.

"I regret very much that the UK was not willing to join the new fiscal compact, as much for the sake of Europe and its crisis response as for the sake of British citizens and their perspectives," said Rehn. "I would also like to remind you that the UK government has also supported and approved the six-pack of new rules tightening fiscal and economic surveillance, which enters into force tomorrow.

"The UK's excessive deficit and debt will be the subject of surveillance like other member states, even if the enforcement mechanism mostly applies to the euro area member states."

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Freeport Miners in Peru, Indonesia Will Go on Strike Over Wages

San Fransico Chronicle, Bloomberg, Wednesday, September 14, 2011

Sept. 14 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc.'s copper miners in Peru and Indonesia will go on strike today after pay-increase talks broke down, union officials said.

About 1,200 workers at Freeport's Sociedad Minera Cerro Verde SAA unit, Peru's third-largest copper producer, are scheduled to walk off their jobs at 8:30 a.m. New York time, union General Secretary Leoncio Amudio said. About 8,000 non- staff workers at Freeport's Grasberg mine will proceed with a planned one-month strike starting at midnight, said Virgo Solossa, head of organizational affairs at the labor union.

Workers in Peru, Chile, Bolivia and Indonesia have gone on strike at copper, gold and zinc mines this year, seeking improved conditions and a bigger slice of record profits. Copper yesterday rose as much as 1.5 percent as threats of mine strikes heightened concern a global shortfall of the metal will increase.

"Freeport's offer was insufficient," Amudio said yesterday by telephone from Arequipa, 750 kilometers (466 miles) southeast of Lima. "There was no chance of reaching an agreement."

Freeport rose 69 cents, or 1.7 percent, to $42 yesterday in New York trading. Cerro Verde rose 10 cents, or 0.3 percent, to $39 in Lima.

Cerro Verde miners held a 48-hour work stoppage last week. Freeport and Grasberg's labor union ended 38 days of talks over 2011-2013 contract terms on Aug. 26 after failing to agree on wages. Negotiations started after the workers walked off from their jobs for eight days in July.

Copper Shortfall

A strike at Grasberg, located in Mimika, Papua province, 1,940 miles (3,120 kilometers) east of Jakarta, and in Peru can potentially widen a global production shortfall of copper estimated at 670,000 metric tons this year by Barclays Capital and boost prices of the metal in London that have fallen more than 14 percent from a record $10,190 a ton on Feb. 15.

"The management expects the workers to cancel the strike plan and return to the negotiation table because the law gives them room to continue negotiation," Ramdani Sirait, a Jakarta- based spokesman at Freeport, said in a text-message. He declined to comment on the impact of the strike on production and sales.

The Grasberg workers still expect wages to increase to between $17.50 and $43 an hour from $1.50 to $3.50, Solossa said today. The union cut their expectations from $35 to $200 an hour initially, he said Aug. 26. Freeport offered a compensation package that includes an increase in basic wages for non-staff employees of 22 percent over a two-year period, Sirait said on Sept. 5.

'No Sincerity'

"We don't see any sincerity from the company on resolving the pay issue and coming up with a new offer," Solossa said by telephone today from Timika, the closest town to the mine. "We've obtained permits from the regent and chief of police for the strike."

Freeport and union officials will resume government- brokered wage talks tomorrow in Lima, Amudio said. Workers are demanding a 9 percent annual wage rise, while Cerro Verde is offering a one-time bonus of 1,200 soles ($705), Amudio said.

Phoenix-based Freeport will continue negotiating a new labor contract, spokesman Eric Kinneberg said on Sept. 8. Cerro Verde, which is studying a $3.5 billion expansion to increase annual copper output by 45 percent, boosted first-half output by 4 percent to 161,246 metric tons.

Grasberg, where operations started in 1990, contains the world's largest recoverable reserves of copper and the biggest gold reserves, according to Freeport's website. Copper production at the mine fell to 1.22 billion pounds (553.4 million kilograms) last year from 1.41 billion pounds in 2009, according to the website. Gold output declined to 1.79 million ounces (50,745 kilograms) from 2.57 million ounces.

Copper for three-month delivery fell 0.2 percent to $8,749.75 a ton on the London Metal Exchange at 10:09 a.m. Jakarta time.

--Editors: Indranil Ghosh, Ryan Woo

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Chavez to pull Venezuela's gold reserves out of Europe and US

Deutsche Welle, 19 Aug 2011

Caracas has benefited from a rally in gold
prices, but it could be at risk if prices fall

Venezuela's president will pull his country's international gold reserves out of the US and Europe and nationalize the gold industry. Still, those steps won't solve the country's serious economic problems, analysts say.

Venezuelan gold bars worth 7.7 billion euros ($11 billion) which are stored in banks in the United States and Europe will be removed by officials and either brought back to Caracas or taken to "allied countries" such as China, Brazil and Russia, according to President Hugo Chavez.

The recall is part of a strategy the Venezuelan president says will protect the country from the effects of the global economic crisis.

"We will put the gold back in the central bank," Chavez told cabinet meetings in a telephone conference this week.

Klaus Bodemer

But analysts say that there are domestic political reasons behind that recall decision and the move to nationalize the gold industry.

"Chavez sees that his international oil policies and the search for allies has had little success," Klaus Bodemer from the GIGA Institute for Latin American Studies in Hamburg told Deutsche Welle.

"At the same time, the 2012 election campaign is fast approaching and he needs money for that," he added.

Geopolitical considerations

Chavez pointed to the economic and financial crises afflicting the US and Europe, saying that putting some of his nation's gold and cash reserves in banks in China, Russia and Brazil is safer.

He said the "repatriation" of 211 of the 365 tons of Venezuelan gold is "a healthy measure for the country" and "an absolutely sovereign decision" that will benefit the Venezuelan people and economy.

Some 99 tons of Venezuelan gold worth 3.2 billion euros are stored in the UK, while the county has smaller amounts warehoused in Canada, the US and France.

"He sees the euro crisis and a possible recession in the US as proof of the instability of these regions," said analyst Bodemer.

"This recall is not going to solve the country's economic difficulties, but Chavez hopes he can take attention away from them."

Money troubles

Chavez has an election campaign to
think about, and finance

After two years of crisis, the Venezuelan economy is slowly beginning to bounce back. Still, its inflation rate of 27 percent is the highest in Latin America, and exploding food prices are hitting the poor, a key pillar of support for Chavez.

To lessen the pain, government guaranteed minimum-wage levels are being increased every few months.

Therefore, despite high oil prices, Chavez is experiencing a cash crunch, especially as oil production levels are declining. When Chavez came to power in 1999, production levels at the state oil company PDVSA were at three million barrels a day. In the 12 years since, that number has fallen to 1.8 million barrels.

Criticism of government expenditures has come from opposition politicians and industry, which has complained about stagnant investment levels and slow infrastructure development. In addition, however, dissatisfaction with state policy is also being expressed by Chavez' own allies.

While social welfare payments are already draining state coffers, Chavez will need to dip into them again for the upcoming election campaign.

"That's another reason for bringing the gold reserves back," said Bodemer. "Chavez would like to convert them into cash and use them in the campaign."

Oil production levels have been falling in Venezuela

Nationalization

This week, Chavez said that he will nationalize Venezuela's gold industry in a bid to stamp out illegal mining and boost international reserves.

"A law on nationalization of the gold production has been worked out," he said. "Let's convert it into our international reserves because gold is increasing in its value."

The country has significant gold reserves in the south-east where iron, bauxite and diamonds are also mined. The current euro crisis and economic turbulence in the US have driven gold prices up to above 1,200 euros per ounce.

"The nationalization of the gold industry will increase Venezuela's reserves, but it's problematic," said Bodemer. "Right now the price of gold is high, but it won't always be. And when it falls, Venezuela will be hit hard."

The analyst also sees a bit of schadenfreude behind Chavez' moves, saying the president wants to send a message to the US and Europe that he has lost trust in them and their troubled economies.

But the step could prove to be short-sighted, he added. Even if the BRIC states (Brazil, Russia, India and China) are playing an increasingly important role in the world economy, "they are still dependent on the northern industrial countries, and that includes China above all," he said. "They don't offer any long-term guarantees."

The gold transfers, according to the expert, are yet another aspect of Chavez' "anti-imperialistic doctrine," Bodemer said.

Author: Cristina Mendoza Weber (jam)

Editor: Rob Mudge

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S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor's is critical of
the banks' plans

The Standard & Poor's rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.

French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.

German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan - and so did the German finance ministry.

But the ratings agency Standard & Poor's warned on Monday that this option "would likely amount to a default under our criteria." The other two major rating agencies, Fitch and Moody's, did not react immediately, but it was expected that they could well come to a similar assessment.

S&P warning calls into question second bailout package

Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.

Eurozone finance ministers put off
deciding on a second bailout package
to help Greece

At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.

The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.

Criticism grows louder of rating agencies' power

With the controversy surrounding a second bailout package due to the assessment of Standard & Poor's, criticism of the big rating agencies' power is growing louder.

ECB member Ewald Nowotny is
one of the rating agencies' critics

European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece's financial stabilization.

The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was "inappropriate." And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one "uneasy."

The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law - at first only in the US, but then in Europe as well.

"The ratings from the big three were declared mandatory for European firms active in the US market," Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.

The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.

"We can't have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties," Straubhaar said.

EU makes efforts to curb the influence of the three big players

Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union's executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).

The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.

Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.

But economists are not so sure such a European agency would change much. "We don't need rating agencies to tell us that Greece is on the verge of bankruptcy," said Thomas Straubhaar. "A European agency would not be able change anything about this fact, nor could it correct it."

And Torsten Hinrichs of Standard and Poor's told Deutsche Welle investors were already free to place their trust in a whole range of agencies.

So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors' trust.

Author: Andrea Rönsberg

Editor: Nicole Goebel

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