The head of the European Union's executive on Wednesday attacked the decision by Moody's credit rating agency to downgrade Portugal's debt rating to junk.
Portugal was given a 78-billion-euro ($112 billion) bailout
in May by the E.U. and the International Monetary Fund (IMF), but
Moody's said Tuesday that, despite that aid, the country will
struggle to bring its debt under control.
"I deeply regret the decision of one rating agency to downgrade"
Portugal, European Commission President Jose Manuel Barroso said in
the European Parliament in Strasbourg, France.
Barroso, a former Portuguese premier complained that it was unfair
to cast doubt on his home country just as it "has just started to
implement" the austerity programme the E.U. and the IMF demanded in
exchange for their aid.
"In the absence of new facts on the Portuguese economy that could
justify the new assessment, yesterday's decisions by one rating
agency do not provide for more clarity, they rather add a speculative
element to the situation," Barroso charged.
"With all due respect to that specific rating agency, our
institutions know Portugal a little bit better," he added. "There is
no reason to be distracted or demotivated, if we stick to the course,
consolidation will succeed and growth will return," he added.
The E.U. has often railed against credit rating agencies for giving
negative assessments on the single currency's weakest economies.
Portugal's latest downgrade will make its debt less attractive to
investors. However, there are gradations of junk debt status and, for
now, Portugal's rating is healthier than that of Greece, which has
the European Union's sickest economy.
Also, unlike Moody's, the Standard & Poor's and Fitch's credit
rating agencies have not downgraded Portugal to junk status. All
three have downgraded Greek debt.
Still, Moody's said that Lisbon risks following into Athens'
footsteps in needing a second bailout to avoid bankruptcy.
Barroso confirmed plans by the commission to impose tighter
regulation and promote more competition among credit rating agencies,
whose credibility was battered in 2008-2009 for failing to spot the
incoming global financial crisis.
In Brussels, a spokesman for E.U. economy commissioner Olli Rehn
said Moody's decision "raises once more the issue of the
appropriateness of behaviour of credit rating agencies and of their
so-called clairvoyance."
"It is an unfortunate incident," Amadeu Altafaj complained.
