Rating agencies are part of a criminal set-up

With all the focus on Greece, I had missed the latest news about the rating agencies cutting Portugal's rating - here's a powerful response from a Portugese journalist

The rationale for Portugal’s rating cut makes no sense. Portugal was targeted with a streak of rating cuts that put us in the verge of “junk”. But then everything changed, a stable majority in parliament, a 78 billion euro loan, a programme designed by the troika, a committed government, a prime-minister obsessed with compliance. No matter what. We weren’t even given a full week: we’re junk.
The reasons for a rate cut are now absurd: the challenge of reducing the fiscal deficit, the need for more money and the troublesome return to the financial markets in 2013 are topics being addressed by the government. By the Country. This rating cut doesn’t identify these challenges, it precipitates them. This decision carries with it severe and immediate consequences. Not only because Portugal takes one step backwards in the path back to the financial markets. But because many investors will now dispose of Portuguese assets. Because collateral on our debt will have to be reinforced. Because today all Portuguese assets lost value. Portuguese companies, Portuguese banks, everything lost value between yesterday and today. At a time when privatizations are being prepared. When stress tests are underway. There are no coincidences. Today, thousands of investors who’ve been short-selling Portuguese stocks and bonds are richer. Buying stocks in EDP and REN will now come cheaper. We’re not on sale, we’re being ransacked.
Portugal was a mad MAN, he threw himself into a cliff and now clings to a rope that was thrown in his direction. He’s trying to hold on with all its strength, lucid and humble in the way only those in ruin are lucid and humble. Then came Moody’s, spitting to the side and saying climbing the rope is tough – thus cutting the rope.
This is not about Portugal, it’s a matter of war between the US and Europe, it’s about profits for private investors in the shadow of ratings agencies. Two weeks ago, an outstanding piece by the journalist Cristina Ferreira, at newspaper “Público”, illustrated that corrosion. Another journalist, Myret Zaki, wrote the remarkable book “La fin du Dollar”, which documents the “system” on which these agencies thrive and the underlying euro-dollar tug of war.
Yesterday, Angela Merkel condemned the power of rating agencies and promised to fight back. In less than 24 hours came the response: S&P’s warning that the Greek debt roll over will be considered a selective default; and Moody’s rating cut on Portugal.
We’re in the middle of a scam and the European Union is impotent. Four years after the crisis that these agencies allowed, Europe has been unable to put out a recommendation, a threat, a European rating agency. What has China done? They created their own rating agency. What does that rating agency say? That Portugal is BBB+. That US debt is no longer triple-A. The Chinese have power and courage, Europe has hung itself in the American bargain-price shop.
The troika is worried about the lack of corporate competition in Portugal… What about competition in rating agencies? Two days ago, Stuart Holland put forward, along with Portuguese former Presidents Mario Soares and Jorge Sampaio, the proposition for a European “New Deal”. He told this newspaper “we need government governing instead of rating agencies ruling”.

We’re not asking for pity, we want fairness. Europe crosses its arms. Let us not do the same. The European Central Bank must stand up against to this despotism. In October, a report by the Financial Stability Board, led by Mario Draghi, advised private banks and the central banks to build their own models for assessing the eligibility of financial instruments, putting a stop to the mechanical evaluations made by rating agencies. Draghi will soon become chairman of the ECB’s governing council. He doesn’t need to terminate rating agencies, he needs to rise up in look into their eyes.
This rating cut is uncalled for, and it will cost us. Portugal is now Europe’s junk. Rating agencies are the undertakers, wealthy and euphoric, of a ridiculously impregnable system. The agencies assure us they don’t hold anything against Portugal. As the man said, “it’s nothing personal, it’s strictly business”. That man was a mob boss.

The rating agencies, are of course, utterly incompetent and corrupt - since they are funded by the companies they rate. This has been admitted by a senior manager. I would normally choose a georg Grosz painting or caricature for a subject like this -for a change I've used James Ensor, the Belgian painter of the early part of the 20th century since the picture captures the corrosive characters of those set in judgement over us.

Is there an alternative?

In March, I drew attention to a new sub-site on Europe established by the Guardian newspaper – and reproduced my response to its invitation for comments and suggestions on possible people who might contribute to the site
Thereafter I forgot about it – but went into the site today and found a useful piece from the historian Mark Mazower about a possible Marshall to deal with the economies of the European periphery. It has set off an interesting discussion thread – with many useful points being made – eg
• The role of the rating agencies (ineffective (they didn’t pick up the practices which led to the global crisis) unaccountable; corrupt (their resorces come from the companies they are rating!)
• The different contexts of post-war Europe and now
• The incentive banks still have for buying dud Greek bonds (they make more than the minimal rates available elsewhere)
• The basic issue about Greece being not their life-style but 2 other things - its political system (its conflicts being so great that it was felt necessary as early as the 1930s to give civil servants constitutional protection for their jobs – with the result that the system has swollen to 800,000); and the immorality of its richer middle class (who simply don’t pay taxes)
One particular post caught my eye -

The private sector caused the crash. The private sector created the conditions for the crash by ceaselessly chest-thumping for ever-greater deregulation and lower taxes (with threats to depart the country if its wishes aren't granted, an undemocratic influence which often outweighed the voices of voters). The private sector also causes the deficit (both here and in Greece) due to its persistent failure to pay the correct amount of tax.
And by relying on unreliable, undemocratic, random, greed-led and potentially catastrophic "market forces", they have created a national and international economy that makes no sense whatsoever - not for people, not for the environment, not for society.
It's time we stopped letting the private sector - in other words, the rich and powerful - hold us, our society and our children, as hostages to the fortunes of capitalism. Anything useful that the private sector makes or does, ought to be done in the public sector. It can be done there without the inefficiencies of competition or stuffing the pockets of the wealthy with profit margins and dividends. And anything useless that the private sector makes or does - and there's a lot of it, from advertising junk food to poodle-grooming parlours and conservatory-salesmen - would not be missed if it were shut down. That might reduce notional GDP, but if those figures place profit above people, then they were useless to start with. The opportunity cost of having a private sector are simply unsustainable in the 21st century: every pound or professional wasted in the private sector is one not being used to shore up the NHS, to build our green energy resources, rebuild our infrastructure, or research the cure for cancer. It's time to cut the parasitic private sector loose, and focus on our society's really valuable economy instead.

Perhaps a bit over the top. But a lot of basic truths. The rich and powerful just don’t seem to get it – that most of them are useless parasites who live in a bubble world separated from reality. It’s all too easy, however, to vent one’s energies on such emotive outbursts – rather than patiently selling an alternative. And the alternatives do exist – as is shown in The Equality Trust’s second Digest which looks at inequality trends and reveals how Sweden’s policies cut inequality there between 1960 and 2005 by 12% - whereas it rose by 32% in the UK in the same period. One June 10, I referred to an article in Social Europe about the Nordic model.
It was Thatcher who undermined our belief in political and collective action. Her mantra was TINA – There is no alternative. And the underlying agenda of the triviliality which overwhelms us in the press and television is the old “bread and circus” one. Powerful media barons want to keep the world the way it is – for their sort. They define what is feasible – and are drumming still the TINA agenda.

Finally, some useful clues on how to assess whether the money in your bank is safe.
Today I'm showing an Angela Minkova print I acquired recently. Astry Gallery had an exhibition of this talented artist's work. She also does quirky little scupltures (see May 5 for an example)

Oldies

Curious weather for July here near the Greek border. Relentless rain on Sunday and ovrecast skies and stunning claps of thunder yesterday afternoon followed by rain. This morning brings some sickly sunlight.
BBC’s Through the Night is always good listening and has currently a nice idea – 2 hours of music composed in 1876 - . Only available for a few days!
For those of you who don’t know Jason’s Godwin’s writing about the Ottoman empire and Istanbul, here is an interview which gives a sense of his knowledge on these subjects.
Travel writing is a favourite genre of mine. Here is a treatment of three famous names – although Robert Byron seems to have slipped out of public view.

Borderlands

Pernik is on the east edge of Sofia and, as befits an old coal-mining and industrial area, a sad eyesore – particularly on a cloudy and rainswept day with its grey rows of jerrybuilt flats an insult to the beauty of the surrounding rolling hills. A few kilometres on, a clutch of peeling high flats announced Radomir. But it was the more charming town of Kyustendil which was my destination – reached through a twisting 20 kilometres ascent and descent of dense wooded hills. In the puddles and rain, the town was less charming than I had remembered from my last visit in 2008 – and was showing evidence of the sort of decline (derelict shops) which can afflict border towns these days. Kyustendil is about 30 kms from both Macedonia and Serbia – and several busloads of umbrella-protected tourists from Macedonia were wandering around the desolate town centre. The old minaret looks set to fall any day – although an old hammam has been spruced up and the water from its well is still gratefully taken in bottles by the residents nearby. Apart from Monday’s workshop (on EU funded territorial cooperation projects), the main reason for my overnight stay is the chance to visit the Vladimir Dmitrov art gallery – whcih is housed in the ugliest concrete bunker I have ever seen. Dmitrov (The Master) is one of Bulgaria’s most famous painters – indeed the name of the gallery’s website actually incorporates the master into it. I’m not actually a fan of a lot of his stuff particulary not one of his trademarks – a face in front of a lot of crudely painted and brightly coloured flowers – but it was good to visit this collection and see a wider range of his paintings. I was taken with some of his earlier, smaller paintings – sunrises and sunsets; his mother; his father – and some multiple face silhouettes. And his Peasant with a hoe (above) which is in the Sofia City Gallery is very graceful.
It was good to meet up again with Belin, one of the trainers, at dinner – who’s deeply involved in the master plan for the stretch of the Danube in this part of the world. He made an interesting observation about the different attitude of the Bulgarians and Romanians to the river. For the Bulgarians, it’s their link with Europe - more psychological than logistical perhaps whereas the Romanians, apparently, have tended to turn their back on it. It’s part of the poor flatlands for them – although with the easing of border controls with Greece in 2007, he sees signs of change in that attitude. I'm reminded of an early 1990s film showing a 1930s military base in that part of the world with the lovely Kristin Scott Thomas speaking Romanian (An unforgettable summer - thanks to UTube in 8 parts - this is part 3)
The great pleasure at the workshop was to meet an official from Pernik – making a major presentation about how they had made succesful bids for EC projects – who was really enthusiastic about her work and the impact which visits to projects in Denmark and Northern Ireland had made on her. Sadly such belief in change and determination is rare in this part of the world. The 2 projects with which Pernik are involved are good examples of EC programmes – Innohubs which links towns on the edge of country capitals in a network to explore and develop good practice for places which have that particular combination of challeges and opportunities. Retina is a network after my own heart – revitalisation of traditional industrial areas (in south-east europe) – since I was one of the founder members in the early 1980s of RETI which brought old industrial European Regions together in a network of good practice and lobbying.
Another interesting chat with Belin whether there is any hope of reviving the derelict villages which are such a striking feature of Bulgaria – in all parts. True (and unlike Romania) Brits, Russians and Dutch people have moved in large numbers into some of these villages – particularly around Veliko Trnovo and the Black Sea (and even on the edges of the Danube) – but the Brits certainly are older people. And it is the young who are needed. He wondered whether the new contractual and work from home patterns which the internet now allows were part of the solution; to which I added my usual input about the increased need for frugality and self-sufficiency also supplying another perspective. We both seem to agree that it is about reframing the issue. The old solution was about location marketing and inward investment. Time to develop self-sufficient strategies!

Coming next

Just back from a trip to Kyustendil, the old town which is close to the border with Serbia and Macedonia - and only 85 kms from Sofia. Purpose was a workshop on inter-regional/transfrontier cooperation with EU funding. For more, read tomorrow's post.

Hungarian distinctiveness

Events in Hungary as relayed on a daily basis by the blog I would nominate as one of the few with a dedicated, sustained and gripping focus – Hungarian Spectrum – read like a surrealist novel. Amazingly both the Chinese and American leadership have been in Budapest in recent days – perhaps showing some of the issues at stake. Some very serious Hungarian people signed an open letter to one of the visitors (Hilary Clinton) about the growing repressiveness of the regime – and yesterday’s post told an amazing story about arrests and intrigues which bring back memories of the 1950s in that country I wouldn't be surprised to read next of action being taken against Hungarian Spectrum!
But the most detailed critique came in January of this year from a very revered source - none less than the Kornai who wrote the definitive book in the 1970s about socialist shortages.
Hungary has produced some amazing people - writers particuarly (Arthur Koestler for example - let alone some of the modern novellists like Peter Nadas) but in the photographic field it blazed the trail (Kertesz; Capa and many more). I have always treasured Andre Kertesz's small collection of photographs of people reading - "On Reading"

Fragility and frugality

The last few days have been cool, overcast and windy here in Sofia. An early morning cycle this Saturday to the old market’s arab shops for basmati rice and other cooking delicacies showed central Sofia at its best – the great low urban skyline; Vitosha mountain edged sharply against the skye; the coffee-carriers and smokers; the small shops with people happy to open the shop early for me and to chat and. Ali (from Lebanon) from the butcher’s next door wanted to know where I was from and what I was doing here. The shop with the rice seems to be Syrian - certainly the jar of fig jam and hugely chunky orange jam were from there - and the beautifully elegant but simple grey cardboard box of olive and laurel oil soap I bought was from Aleppo. The supermarket chains just don't care that they drive out such gems of experience from our lives. And we fail to appeciate the significance of such loss. Except those covered in the pages of Paul Kingsnorth's (unfortunately entitled) book Real England - the battle against the bland.
Because I’m so impractical, I’ve always had a sense of wonder about things other people seem to take for granted – electricity, running water, These days, more people perhaps are feeling a sense of fragility and beginning to rediscover the values of frugality. I don’t think this is a bad thing. What is unacceptable is that those who have saved honest money and put in what they regarded as the safest place (banks) are having to worry now where they should put it. I don’t have anything sensible to offer on the Greek crisis - but John Lanchester is one of the few journalists who offer us clear insights into the global financial crisis when it first revealed itself in 2007 and has a good piece in the current London Review of Books. Real World Economics also had a good post recently on the subject.
And somewhere in the last couple of days I read something interesting about Estonian people (I think) not being as addicted to credit cards as some other countries I might mention (France is another honourable exception I understand?)
I’ve just finished reading what I consider is one of the best novels I have ever read – A Perfect Peace by Amos Oz written some 25 years ago but one of several of his writings available at half price in a nearby bookstore. I've slightly amended the only review I could find -

it's 1965, and the children of the first settlers of an Israeli kibbutz are grown-ups. Here is the way one character sees them: "Neither Asiatics nor Europeans. Neither Gentiles nor Jews. Neither idealists nor on the make. What can their lives mean to them, raised in this whirlwind of history, this place-in-progress, this experiment-under-construction, this merest blueprint of a country..." This is a good example of some of his writing - the way he piles up expressions and descriptions. The main plot centres around a young man, Yonatan, who has a quiet wife, Rimona. His father (Yokel) is a former cabinet minister who now heads up the kibbutz. Yonatan's mother (Hava) is an energy-packed harridan. Yonatan works as a mechanic in the tractor shed, but he longs for a different life. One rainy winter night a miserable little fink (he calls himself that) shows up, talks incessantly (mostly quoting Spinoza) and gradually makes a place for himself. He becomes Yonatan's friend and (ultimately, with Yonotan’s encouragement) Rimona's lover after Yonatan fulfils his threat to flee. Oz provides brilliant portraits of a handful of characters. Oz is an interesting, original writer. Several of his characters serve as narrators of this story, taking turns, adding thoughtful layers of depth and meaning – and there are 3 of the most powerful outporings of emotions I have ever read – 2 of then in draft letters, the other in mean and savage outburst from Hava.The result is a suspenseful and moving novel that never glosses over the harsh truths about a "mob of the strangest individuals who ever pretended to be a people."

Greatness and local heroes

Lists – best 25 novels, films etc - are always enjoyable and useful exercises. They not only remind us of artists who have perhaps slipped a bit in our memory but, more importantly, they force us think about the criteria we use to judge what is useful/beautiful etc. So I was intrigued when my favourite E-journal – Scottish Review - reported at the beginning of the week that 'Who's Who in Scotland' was celebrating its 25th anniversary with an opinion poll conducted among the 4,000+ inhabitants of its pages. The Who's Who in Scotlanders were asked to nominate the greatest Scot of the quarter century of its existence. For the purposes of the poll the word 'Scot' was interpreted loosely to include anyone living partly or exclusively in Scotland, irrespective of nationality, the only qualification being that they had played some part in the life of Scotland since the book's foundation year (1986).
As my readers come from all around the planet (I kid you not!) I will not bore you with the details of the top 25 names which emerged – save to say that Sean Connery, Billy Connelly and JK Rowlinson were not amongst them and that there were a remarkably high number of writers, poets and politicians amongst the nominations from the nominated great and good. True to its philosophy, Scottish Review decided to take a lightning poll amongst its readers – and ask us to select our nominee (encouraging us to add new names). Various contributions were duly printed today (including mine I'm glad to say) and I have amended it to make more sense for a wider readership -

Greatness can be defined in two ways – first elevation to the highest accepted positions of politics, literature, business, etc. This can be measured in terms of position, awards and accolades or turnover. It's not difficult to measure. But such people (almost by definition) are rarely great in the more profound sense – of touching the human heart and influencing people and events (eg Gandhi and Luther King). I have met and talked with nine of these (Gordon Brown and Robin Cook (Labour PM and Foreign Sec respectively but, in an earlier life, both on the left of the party), Donald Dewar (who forced through the Scottish Parliament and was known as an honest politician); Winnie Ewing (a nationalist who spearheaded its breakthough), Jo Grimond (Liberal leader), Mick McGahey (Communist trade unionist), Sorley MacLean (poet), John Smith (Leader of Labour party until his death in the early 1990s) and George Younger (Conservative Minister for Scotlland in 1980s) and only Jo Grimond rates as a person who inspired me. Despite my being a Labour regional politician in a Liberal stronghold (Greenock) he chose to work with me and local people on a community project (ignoring his local political colleagues) and showed great charisma and humility. Those who fall into the second category – of touching hearts and inspiring lasting change are rare indeed. They operate at a different level – more serene and less concerned with occupying positions of business or political power. I can think of quite a lot of “local heroes” I knew in the West of Scotland (not least my father) . But two in particular spring to mind - a charismatic Minister Rev George MacLeod who established a radical voice in the Iona Community he created within the Church of Scotland. And also a social policy activist, Kay Carmichael, who helped shape Scotland’s unique social care system in the late 1960s and early 1970s and was always a quiet voice of sanity and support. But she was perhaps too early for this time schedule.

And there is probably the rub! That the generation of the last 25 years have no genes of real greatness!! What about my readers doing an exercise on the "greatest" 5 individuals of their country in the last (say) 40 years?? With reasons? And, as a bonus, what they learned from doing the exercise?
The painting is one I picked up in a lot here recently for a song - unframed, unknown (said to be Vulchev Vasil)and unfashionable these days with its socialist realist touch and memories of partisan activities. But it has real drama to it