THE PRESIDENT of the European Commission, Jose Manuel Barroso, has criticised international credit ratings agencies following yesterday’s downgrading of Portugal long-term debt to junk status.
Speaking in Brussels today, Barroso questioned the lack of European-based ratings agencies. Reuters quotes Barroso saying:
It seems strange that there is not a single rating agency coming from Europe. It shows there may be some bias in the markets when it comes to the evaluation of specific issues of Europe.
Ratings agency Moody’s downgraded Portugal yesterday, citing concerns the country may require a second bailout before it can return to the markets to raise state funds.
Portugal’s optimism at recovering from its debt crisis was quashed by yesterday’s downgrade as borrowing costs rose and stocks fell on the news. Spain and Italy also suffered knock-on effects from the downgrade. Ireland’s two-year bonds today rose above 12 per cent for the first time, Business Insider reports.
The BBC reports that a spokesperson for the European Commission, Amadeu Altafaj, questioned the timing of this latest downgrade, as well as voicing concerns over the “appropriateness and behaviour” of ratings agencies generally:
The timing of Moody’s decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation.
Barclays Capital Research said the ratings drop was surprising and seemed more “like a reaction to the Greek situation”, while Portuguese bank chiefs criticised the downgrade as “immoral and insulting” and “incomprehensible”.
The main ratings agencies are Moody’s, Standard & Poor’s and Fitch.
- Additional reporting by the AP
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