The high-profile criticism follows long-simmering European complaints about Moody’s and its two competitors, Standard & Poor’s and Fitch, centring on whether they have improperly attempted to influence policy-making in the ongoing debt crisis.
The Portuguese downgrade – four notches to “junk” status – comes amidst a heated debate over how hard to push private owners of Greek debt to delay repayments from Athens. José Manuel Barroso, president of the European Commission, questioned the timing, and said Moody’s was guilty of “mistakes and exaggerations”.
On Tuesday, Angela Merkel, German chancellor, and François Baroin, French finance minister, sought to downplay Moody’s decision, saying it would not affect their decision-making.
But Mr Barroso’s comments, along with similar remarks Wednesday by Wolfgang Schäuble, the German finance minister, appeared a concerted change in tenor, with both men arguing that efforts to reduce the agencies’ power would gain momentum.
“We can’t understand the basis of this announcement,” Mr Schäuble said. “We have to break the oligopoly of the ratings agencies.”
(...) Rating agencies defended their decisions, with a Moody’s spokesman saying the agency’s continues “providing independent, objective assessments of credit risk on debt securities”. S&P said: “We are focused on our role of providing investors with an independent and globally consistent view of creditworthiness, based on our published criteria.”
Some analysts accused European officials of attempting to distract voters and financial markets from their difficulties in formulating an effective response to the crisis.
“EU leaders will be well advised to stop blaming ratings agencies for their own shambolic handling of the euro area crisis,” said Sony Kapoor, head of Re-Define, an economic consultancy.
The European complaints echo similar criticisms made by Washington in April, when S&P cut its outlook for US bonds in the midst of budget negotiations between the White House and congressional Republicans. At the time, senior US Treasury officials questioned the timing and accused S&P of being misinformed about the budget talks.
European officials have argued that downgrades have frequently coincided with high-profile meetings of European leaders – evidence, they believe, of agency politicisation.
(...) “The credit rating agencies are playing politics not economics,” said a senior EU official. “The timings of the downgrades are not a coincidence.”
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