Indecisive Leaders Endanger Euro Recovery: Fitch CEO
Staff Writer, CNBC.com
The euro zone is increasingly threatened by leaders putting off decisions about its problems, Paul Taylor, president and chief executive of ratings agency Fitch, told CNBC’s “Squawk Box Europe” Wednesday.
“We lurch from crisis to crisis and while our core assumption is that the system will muddle through, the risk that it won’t increases as we see the problems being pushed further and further down the road,” Taylor warned. “The certainty of that assumption has been weakened over the last month.”
The pressure on European leaders to act against a further escalation of the debt crisis has grown in recent weeks as stock markets have fallen across the continent.Spain, the single currency’s fourth-largest economy, now looks increasingly like it may become the next country to seek a bailout as its banking sector’s problems come to the fore.
Fears thatGreece may leave the single currency have also increased.
“The response to a Greek exit would be the key thing to us,” Taylor said. “There are benefits for all members of the system if they stick together.”
Ratings agencies themselves have been criticized over the course of the economic crisis for not downgrading fast enough. The agencies could be rotated by companies, in an effort to increase competition, under new European Union plans.
“Rotation as a principle is not necessarily a bad idea. It depends on how they try and interpret rotation and the details of what’s implemented,” Taylor said. “It helps to have competition in the industry—and we have more than we ever have before. A whole root and branch reform is not needed.”
“Our concern is that there’s a fragmentation of the rules for our industry. We would like to see a set of rules that could be applied across the globe,” he added.