Business, Economics and Jobs

European Commission criticizes Portuguese ratings downgrade

Moody's on Tuesday slashed Portugal's credit rating by four levels, becoming the first agency to cut a country's credit standing to junk.

It also warned that Portugal may need a second round of rescue funds, in addition to the €80 billion package approved earlier this year, before it can return to capital markets.

The Commission questioned of the "appropriateness of behaviour" of international ratings agencies, which also include Standard & Poor's and Fitch.

European Commission spokesman Amadeu Altafaj told a Wednesday news briefing:

The timing of Moody's decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation. This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies.

Reuters reported that the European Commission President Jose Manuel Barroso said Moody's decision had added to speculation concerning euro-zone debt. He told a news conference in Strasbourg:

Yesterday's decisions by one rating agency does not provide more clarity. They rather add another speculative element to the situation.

Portugal quickly hit back at Moody's decision, arguing the agency had failed to consider the popular support it had for tough new austerity measures.

In April, Portugal became the third euro zone country to request a bailout, after Greece and Ireland.

Both Standard & Poor's and Fitch Ratings both have Portugal at BBB-minus, which is the bottom of the investment grade range.