European politicians accused credit rating agencies on Wednesday of anti-European bias after Moody’s downgrade of Portugal’s debt to “junk” cast new doubt on EU efforts to rescue distressed eurozone states without debt restructuring.
European Commission President Jose Manuel Barroso said the decision to cut Lisbon’s rating by four notches so soon after it became the third country to receive an EU/IMF bailout was fueling speculation in financial markets.
“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 the specific issues of Europe,” Barroso told reporters in the European Parliament.
PHOTO: REUTERS
German Finance Minister Wolfgang Schaeuble called for limits to be placed on the rating agencies’ “oligopoly.”
Of the three major agencies, Moody’s and Standard & Poor’s are US-owned and based. Fitch Ratings is headquartered in New York and London and majority-owned by a French company.
The EU’s executive is drafting proposals to regulate rating agencies and there has been political talk, but no action so far, about creating a European agency.
Michel Barnier, the EU official in charge of regulation, said later he could examine how to suspend the rating of countries that are getting bailout funds from the EU and IMF. These are Greece, Ireland and Portugal.
Moody’s thumbs-down, coming so soon after a new center-right Lisbon government announced austerity plans going beyond international lenders’ demands, called into question the EU strategy for dealing with the eurozone sovereign debt crisis.
Moody’s said Portugal may need a second round of rescue funds before it can return to capital markets, just as European governments and banks are haggling over a second 120 billion euro (US$171.8 billion) bailout for Greece, which has a much higher debt ratio.
Ireland, the other eurozone country to have received a bailout, said on Tuesday it might have to make additional spending cuts next year to meet deficit -reduction targets in its 85 billion euro bailout plan due to an economic slowdown.
A Reuters analysis last week found that Dublin may also need a second bailout because it is unlikely to grow fast enough to make the envisaged full return to market funding in 2013.
German Deputy Finance Minister Joerg Asmussen said it was “absolutely premature” to discuss a second rescue package for Portugal and Berlin was confident the country could implement its reforms and get back on track, while new French Finance Minister Francois Baroin was just as dismissive of Moody’s action on Portugal.
“A ratings agency’s view is not going to solve the matter of tension on sovereign debt markets and the budgetary crisis,” he said, adding he trusted Portugal’s new government to meet its deficit reduction target by 2013.
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