EUROPE lashed out at ratings agencies yesterday after a Moody’s downgrade of Portugal sent peripheral debt costs soaring across the continent.
In a sign of growing frustration among EU officials, European Commission president Jose Manuel Barroso attacked ratings agencies for being anti-European.
“It seems strange that there is not a single rating agency coming from Europe,” he said. “It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe.”
German finance minister Wolfgang Schaeuble threatened the agencies with “limits”: “We must break the oligopoly of the ratings agencies,” he said, without detailing how.
The furious response from EU officials came after a sharp rise in the yields charged on the debt of peripheral Eurozone nations.
Following the Moody’s downgrade, which came after markets closed yesterday, the yield on Portugal’s two-year debt shot up by 220 basis points to 16.7 per cent, with equivalent Spanish and Irish debt also rising 130 and 250 basis points respectively.
The EU is currently drawing up legislation to dethrone the agencies by removing their legal status, so as to stop a round of automatic sales of instruments that are downgraded.
But officials have also mooted the idea of establishing a publicly funded EU agency to rival the big three private firms. However, such an agency could find it hard to gain credibility in rating European sovereigns.
Another proposal would see agencies forced to warn states of downgrades three days before publishing them, which critics say would lead to leaks.
In a sign of anxiety among Eurozone leaders, Irish finance minister Michael Noonan has moved to head off concerns about Dublin, saying that he could make an extra €400m of savings next year than is required under the terms of its bailout.