Euro relations with ratings agencies heading for meltdown after new attack
Published 06/07/2011 | 13:12
The relationship between the European Commission and ratings agencies broke down further today after the body criticised Moody’s downgrading of Portugal’s debt to junk status.
Yesterday German Chancellor Angela Merkel had a go at Standard & Poor’s for calling plans by French banks owed €53bn by Greece to allow later payment of the debt.
The latest criticism came from economic affairs Ollie Rehn’s spokesman Amadeu Altafaj.
He said the Moody's decision was based on “absolutely hypothetical” scenarios which are not in line with Portugal's economic situation.
“This is an unfortunate episode and raises once more the issue of the appropriateness of behaviour of credit agencies and of their so-called clairvoyance,'” he told a reporters in Brussels.
Moody's has warned that Portugal may need a second bail-out as it cut its sovereign debt to junk status.
Portugal received a €78bn bail-out earlier this year, and it will have to undergo a major austerity programme to reduce its deficit to 5.9pc of GDP or growth.
Yields, or the interest rate demanded by investors, on Portuguese bonds spiked this morning after the Moody's move.
Meanwhile, Germany's deputy finance minister said it is too early for talk of a new package for Portugal.
'”It is absolutely premature to talk about a second programme for Portugal. The programme has just started,” deputy finance minister Joerg Asmussen said in an interview with Reuters Insider TV.