In the Business of Meddling with Politics? Sovereign Rating Agencies and Elections

Previously fairly obscure entities, sovereign rating agencies have come to the forefront of attention since the start of the European sovereign debt crisis due to their role in triggering the downfall of Greece and weakening the position of other debt-ridden economies. However, the influence of rating agencies extends much further than generating market panic about insolvent debtors. Rating agencies continuously assess countries’ policy performance, issue reports and grades and formulate recommendations. Through this activity, they not only meddle with policy making of democratically elected governments but also potentially influence the political climate. This paper seeks to gauge the extent to which sovereign ratings have influenced political outcomes since sovereign ratings have become widely used in the early 1990s. Based on a content analysis of sovereign ratings issued by Standard and Poor’s since 1990, it identifies the ways in which rating reports make pronouncements on policies and politics and it relates downgrades and upgrades to the electoral performance of government incumbents.