First of all, why do the ratings agencies exist?
Their purpose is to examine the accounts of companies/governments and produce an opinion of how capable the entity is of paying the interest and capital due using a scale to allow differentiation. Thus a very safe credit is rated AAA, the highest rating on the scale, implying the entity is very capable of repaying its obligations, while the lowest, D, default, implies that the company has no ability to pay the interest due to its creditors and they are also likely to suffer a loss of capital.
Why was this useful?
Because during the seventies, essentially pre-internet, if I wanted to know about a company or government, it would take time. To order the accounts, have them arrive by post, decipher them, write them up. And then for foregin entities, there was the problem of translating the accounts, accounting policies might be different. By phoning up a rating agency, I could quickly find out that, say, the German bank bond I wanted to invest in was rated A, paid 6% interest and compare this with my Italian bank bond, rated A+, paying 6.25% interest.
What has changed?
I'm sitting in Milan. I want to know about the accounts of Samsung and how good the credit of the Government of Botswana is. I have Bloomberg for a cost of around $ 18,000 per annum. Or Capital IQ. Or Thomson Reuters. In about 20 minutes, I can make a reasonably informed opinion, my own reasonably informed opinion, on how good the credit of these two entities is. Now in 20 minutes, it will not be perfect, but add this to thousands of other people doing exactly the same and the single analyst at S&P does not have a chance. The market is way ahead.
Even without Bloomberg, you want to analyse a company anywhere in the world, now thanks to the magic of the internet and English, I reckon it takes about an hour by going to the investor relations section of the site and downloading the annual accounts. Again, it won't be perfect, but it will give you a rough idea. And then you can phone up Brazil and ask some questions in English, do more work on the accounts and get a very good idea in less time than it would have taken for the accounts to arrive 15 years ago. The cost of information has dropped so precipitously that anyone can be an analyst.
The idea to have a European rating agency to provide 'proper' ratings on European companies and countries is absurd, you may as well as re-construct the Maginot line to prevent hacking.