Today, Greece and Portugal saw their credit ratings downgraded, once again. Greece’s socio-economic mess notwithstanding, reading the linked BBC article made the absurdity of the dependence on the ‘markets’ (and the ‘unrated’ rating agencies that drive them) clearer than ever: in 2010 Greece woke up to the realisation — or at least some in that country did; others had realised much earlier and a portion of the population was in denial — that it was in dire straits. It became clear that a massive existing debt, years of mismanagement, corruption, collective contempt for law, binging on a false sense of wealth, frivolous consumption and a norm promoting a degenerate unproductive lifestyle meant that the country could never meet even its most fundamental obligations alone, so it turned to the support of the European states in an attempt to secure funds with reasonable terms and — in the process — convince and calm the markets, so that it could lower the interest rate of its bonds that had skyrocketed in the period of a few months. At least that was the official explanation. This mechanism came, first in an ad-hoc form, and now in the form of the ESM. Let’s be clear about something: the ESM is meant to be a stabilisation mechanism that ensures that states in the eurozone will be able to secure funds with relatively reasonable terms; terms better than those offered by the markets, but not exactly a free ride. The ESM is not panacea; it is primarily meant to benefit those commercial entities that have invested in states that make use of it, even if there is a possibility of partial or full restructuring of the debt —a measure which would lead to losses for the lenders of those states. Since the ‘crisis’ erupted Greece’s credit rating was downgraded several times. The latest downgrade, it was argued, was reflecting the fact that the ESM might facilitate a restructuring of the debt, leading to a loss for the lenders, thus making any investment in Greece riskier. This makes little sense: the main reason the ESM was created was to help EU states requiring assistance to secure funds with reasonable terms and avoid default — thus satisfying the markets concerned that those states might not be a good investment for them and in the process lowering interest rates. Yet, the very existence of the ESM was now being used as a reason for a further downgrade, under the pretext that since under the ESM it is possible for a state to restructure its debt under certain circumstances, any investment in this state’s bonds is less attractive.

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