I just wonder why Romania got Moody’s Baa3 rating with stable outlook while Hungary’s rating was cut to junk. It’s no coincidence but American intrigues! Obviously Hungary’s economy is much better since its government don’t spend millions of country’s budget for annexation of nearby territories like Romania dreaming of Moldova. Besides Romania stand for US interests and it is likely Washington decided to reward a service by pushing hard on Moody’s to help those poor Romanian bastards...
Annexation of foreign territory? Come on... That's just ridiculous...
Coming back to your question:
1) Much lower foreign debt
2) Much more stable political environment. The extreme right in Hungary is now really strong and not so in Romania.
For sure there are others...
I don't want to bring in the usual "racist stuff", but it isn't nice to call a whole nation "poor bastards". Anyway...I guess the good rating we received was somehow in connection with the austerity measures imposed by the IMF and respected by our "smart and lovely" government. For example, our VAT rate last year was (and still is) 24% ) , while the minimum wage at the current exchange rate is around 200 euro ) But tbh, our biggest luck in this crisis was that we didn't adopt euro and we still have our own currency.
To be fair rating agencies like Moody's have been shown to be part of the whole financial services industry corruption in the US which helped caused the meltdown. So it is hard to have any respect for anything Moody's say at this point.
Rotten To Core With Conflicts
Henry Blodget|Aug. 19, 2011, 11:33 AM|130,779|87
Raymond McDaniel, Moody's CEO
A former senior analyst at Moody's has gone public with his story of how one of the country's most important rating agencies is corrupted to the core.
The analyst, William J. Harrington, worked for Moody's for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody's issued during the housing bubble.
Harrington has made his story public in the form of a 78-page "comment" to the SEC's proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody's processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.
The primary conflict of interest at Moody's is well known: The company is paid by the same "issuers" (banks and companies) whose securities it is supposed to objectively rate. This conflict pervades every aspect of Moody's operations, Harrington says. It incentivizes everyone at the company, including analysts, to give Moody's clients the ratings they want, lest the clients fire Moody's and take their business to other ratings agencies.
Moody's analysts whose conclusions prevent Moody's clients from getting what they want, Harrington says, are viewed as "impeding deals" and, thus, harming Moody's business. These analysts are often transferred, disciplined, "harassed," or fired.
In short, Harrington describes a culture of conflict that is so pervasive that it often renders Moody's ratings useless at best and harmful at worst.
Harrington believes the SEC's proposed rules will make the integrity of Moody's ratings worse, not better. He also believes that Moody's recent attempts to reform itself are nothing more than a pretty-looking PR campaign.
We've included highlights of Harrington's story below. Here are some key points:
Well it is a bit like independent audits by another private company.
All the company wants is a clean audit, all the audit company wants is to ensure it gets the business next time and so you end up in a situation where the audit company ignores certain issues and only looks into areas where they see problems are obviously there at the high level as they have to in order to have any credibility.
Though it seems Moody's are behaving even worse than this here TBH given clean ratings to companies that they know should have been given bad ratings.
Your analogy is good one.
In relation to Hungary... The government invited the IMF EU EMF and ELO in to conduct themselves as they saw fit.
When you announce to the world that your finances are a disaster and you WILL do anything to keep Europe happy then of course that will colour opinion. I think it's great that they want to be proactive, but it does raise concerns that they will be able to repay. Much in the same way our own bonds went through the ringer. Give it time. Maybe they'll manage to keep the populace onside, maybe not.