Thursday, July 7, 2011

EU blasts Moody's over Portugal rating

President of the European Commission Jose Manuel Barroso

Source: Press TV

The EU has criticized credit rating agencies, accusing them of showing bias against the bloc after Moody's Investors Service downgraded Portugal's sovereign debt rating to "junk bonds" status.

President of the European Commission Jose Manuel Barroso criticized the Moody's decision to relegate Lisbon's national debt status and said, "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."

The credit rating agency lowered Portugal's rating by four notches to Ba2 on Tuesday, voicing concerns that the debt-ridden country would not afford to reduce its deficit without receiving another bailout, Reuters reported.

The agency further linked Portugal's situation with that of other EU nations such as Greece, which is also set to receive its second international bailout package worth EUR 12 billion.

"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 the economic program" pursued by Portugal, the European Commission spokesman for economic affairs Amadeu Altafaj said.

The criticism comes while the Portuguese finance ministry issued a statement in critique of Moody's contentious assessment, and said the southwestern European country's tax plan “constitutes a proof of the government's determination to guarantee the deficit targets for this year.''

Meanwhile, Germany's Finance Minister Wolfgang Schaeuble called for limits to be placed on the rating agency's alleged “oligopoly,” pointing out that “Portugal is ... not only completely on course but even ahead of the curve, so there really is no factual justification for such an assessment at this early point.”

Moody's Investors Service, Standard & Poor's, and Fitch are three of the main credit assessment agencies that judge the creditworthiness of European nations.

Lisbon was forced to seek a bail-out loan package from the International Monetary Fund (IMF) and European Union after the government collapsed in April, causing its borrowing costs to rise dramatically. The loan was worth EUR 78 billion.

Portugal is the third country to succumb to financial troubles in the eurozone debt crisis and seek funding assistance after Greece and Ireland.

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