7 Jul 2011

Ratings agencies criticised by EC

9:25 am on 7 July 2011

The European Commission has strongly criticised international credit ratings agencies following the downgrade of Portugal by Moody's.

The Commission said the timing of the downgrade was "questionable" and raised the issue of the "appropriateness of behaviour" of the agencies in general.

Earlier, Greek Foreign Minister Stavros Lambrinidis said the agencies' actions in the debt crisis had been "madness".

Ratings agencies have downgraded Greece and Portugal many times recently.

The three main agencies are Standard & Poor's, Moody's Investors Service and Fitch.

German Finance Minister Wolfgang Schaeuble told a news conference that he wanted to ''break the oligopoly of the ratings agencies'' and limit their influence.

On Tuesday, Moody's downgraded Portugal's debt to ''junk'' status, citing worries that the country may need a second bail-out.

''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,'' said commission spokesman Amadeu Altafaj.

Commission President Manuel Barroso said it was strange that none of the ratings agencies were based in Europe.

''(This) shows there may be some bias in the markets when it comes to the evaluation of specific issues of Europe,'' he said.

The BBC reports Greece is currently in the process of negotiating a second bail-out. Rating agencies are watching this closely, as commercial lenders are discussing how they can contribute to the bail-out.