The Struggle to Perform the Political Economy of Creditworthiness

Abstract

Analysing the European Union's regulatory response in the wake of the credit and sovereign debt crises, this paper argues how its adoption of risk management as the core strategy for governing the credit ratings space may undermine European efforts to rebalance the growing asymmetry between private expertise and public democracy. While centralised oversight, enhanced transparency and restorative, technical intervention seem like sound regulatory initiatives, I problematise the methodologies, models and assumptions of sovereign ratings to show how the new ratings framework may actually impede the ability of the technocratic European Securities and Markets Authority (ESMA) to redress the most egregious deficiencies of ratings. Drawing on the performativity of market relations, the paper argues how ESMA's supervisory conflicts undermine the EU's capacity to perform an alternative political economy of limits. Neither is it democratically sanctioned to interfere in the analytical substance of ratings nor should it distort the social facticity of creditworthiness by relying primarily on quantitative risk analysis, ESMA will be forced to either repoliticise the ratings process or promote the status quo, which diminishes fiscal sovereignty.

KEYWORDS:

• credit ratings
• performativity
• risk and uncertainty
• sovereign debt
• financial governance
• European Securities and Markets Authority

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author.

Additional information

Bartholomew Paudyn (author to whom correspondence should be addressed), International Relations Department, London School of Economics & Political Science, Houghton Street, London, WC2A 2AE, UK.