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Barroso hits out at bias in downgrades

07-07-2011 13:46 BJT

The European Central Bank is fighting a war on two fronts, as the bank seeks to contain price pressures while credit rating agencies from across the pond threaten to blow the euro zone apart. European Commission President, Jose Manuel Barroso, is accusing the agencies of anti-European bias after Moody's downgraded Portugal's debt to junk.

European Commission President, Jose Manuel Barroso, says Moody's decision to cut Lisbon's rating by four notches so soon after it became the third country to receive an EU/IMF bailout was fueling speculation in financial markets.

He also attacked ratings agencies for being anti-European.

Jose Manuel Barroso, President of European Commission said "I deeply regret the decision of one ratings agency to downgrade the Portuguese sovereign debt, and I regret it both in terms of its timing and its magnitude. Portugal has just started to implement a medium term adjustment programme, negotiated and agreed with the European Commission, the European Central Bank (ECB), and the International Monetary Fund, the programme backed by all euro area member states."

Part of Moody's rationale for the downgrade was that the EU's determination to get private sector investors to share the burden of bailouts, as being discussed for Greece, increases the chances of Portugal being shut out of the market beyond 2013, when it hopes to resume bond issues.

Portugal took a 78 billion euro bailout from its European partners and the International Monetary Fund earlier this year, after nervous investors began charging it unsustainably steep returns on loans.

Barroso says Moody's actions adds yet another speculative element to the country's already-difficult situation.

Jose Manuel Barroso said "I can only encourage Portugal to continue on the course jointly defined with the Commission, the ECB and IMF, and with all due respect to that specific rating agency, our institutions know Portugal a little bit better."

Of the three major agencies, Moody's and Standard & Poor's are U.S.-owned and based. Fitch Ratings is headquartered in New York and London, and majority owned by a French company.

The Moody's downgrade, viewed by some analysts and officials as unexpectedly harsh, triggered new outrage in Portugal, where austerity measures over the past year have included tax rises, pay freezes and welfare cuts.

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Editor:Xiong Qu |Source: CNTV.CN

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