The Crooked Path of Financial Reform

In Europe, the market for Greek debt has frozen, and interest-rate spreads between Irish and German euro-denominated debt recently reached alarming levels. Spain has succeeded in reducing its own spread vis-ˆ-vis Germany but only after a policy U-turn. Portugal has announced a major austerity package, hoping for the same effect. But, even when they are not in danger of losing access to the bond market, most governments in the developed world nowadays anxiously await the pronouncements of the same rating agencies that they were recently vilifying.

This change of fortune is shocking. To public opinion, it looks as if arrogant financial-market professionals learned nothing from the crisis, feeding the impression that nothing has changed - except for the worse.