Friday

27th Apr 2018

Barroso to ratings agencies: 'We know better'

Portugal-born EU commission chief Jose Manuel Barroso on Wednesday (6 July) accused American credit rating agency Moody's of being "biased" and "speculative" for downgrading its assessment of Portugal's debt payment capacity.

"Rating agencies are market players and as such they are not immune from market cycles, mistakes and exaggerations that come with them," Barroso said during a press conference in Strasbourg.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Citing "formidable challenges" and a possible second bailout with private banks involvement, Moody's on Tuesday downgraded Portugal's credit rating to 'junk', meaning it is not safe for pension funds to buy Portuguese bonds.

"I deeply regret the decision of one rating agency to downgrade the Portuguese sovereign debt. I regret it both in terms of its timing and its magnitude," Barroso said, echoing remarks from Lisbon that the US-based agency had not taken into account the recently adopted austerity package.

"Yesterday's decision by one rating agency does not provide for more clarity, but rather adds another speculative element to the situation," he argued.

"With all due respect to that specific rating agency, our institutions know Portugal a little bit better. Our analysis is more refined and complete," Barroso went on, encouraging the Portuguese to stick to the agreed programme.

In his defence of Portugal's ability to pay back its debt, the former Portuguese premier said that both the German chancellor and the French finance minister recently had dismissed credit rating agencies and "made it clear that EU decisions on financial matters are based not on market players positions but on the objective assessments of the European Commission, the European Central Bank and the International Monetary Fund."

Ever since the beginning of the sovereign debt crisis, EU leaders have had a hard time convincing markets of the effectiveness of bailouts and austerity packages when it comes to the ability of countries like Greece and later on Ireland and Portugal to pay back their debt.

The credit rating market is currently dominated by the so-called Big Three - Moody's, Standard and Poor's and Fitch - all based in New York, except for the latter which also has headquarters in London and belongs to a French-owned parent company. Still, the EU feels under-represented and is now looking at strengthening regulations and possibly stimulating the emergence of a Europe-based rival.

An EU draft law is likely to be put forward by the end of the year to "improve the methodology of rating sovereign debt, reduce excessive reliance of financial institutions on ratings, reduce conflicts of interests and introduce more responsibility and competition [on the credit rating market]," Barroso explained.

While admitting that it is not for EU institutions or politicians to decide upon the creation of a Europe-based credit rating agency, Barroso did criticise the quasi-monopoly of the Big Three.

"It is quite strange that the market is dominated by only three players and not a single agency is coming from Europe. It shows there may be some bias in the market when it comes to evaluation of issues in Europe, that Europeans know better than others," he said.

Polish Prime Minister Donald Tusk, who was also present at the press conference as new chairman of the rotating EU presidency, poured some cold water on expectations that credit rating agencies would change behaviour.

"Only a naive person could have expected rating agencies to change into angels and have nothing else on their minds but ways of helping Greece or another country in trouble. Nobody establishes a rating agency in order to help anybody," he said.

Macron and Merkel pledge euro reform

France and Germany have pledged to forge a joint position on euro reform by June, despite German reluctance on deeper monetary union.

EU watchdogs to protect farmers

The European Commission is due to unveil a legislative proposal that will should help farmers get paid on time for their products.

EU raids Murdoch firm in sport 'cartel' probe

EU commission launched dawn raids in several member states in anti-trust probe into sports rights media firms. One of those hit, in London, was owned by media tycoon Rupert Murdoch.

Macron and Merkel pledge euro reform

France and Germany have pledged to forge a joint position on euro reform by June, despite German reluctance on deeper monetary union.

Stakeholders' Highlights

  1. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  2. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May
  3. EU Green Week 2018Green Cities for a Greener Future. Join the Debate in Brussels from 22 to 24 May
  4. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  5. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  6. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  7. Mission of China to the EUProgress on China-EU Cooperation
  8. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  9. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  10. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  11. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  12. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off

Latest News

  1. EU tells platforms to sort fake news by October or face new law
  2. Civil society chief: social media can't replace engagement
  3. The reality behind the €7 'Brexit bombshell visa'
  4. Commission wants bigger post-Brexit budget
  5. Whistleblowers could be enforcers of rule of law in Europe
  6. EU shelves Macron idea for 'European Darpa'
  7. Don't play EU 'games' with military HQs
  8. EU had a plan for Jordan - now it's time to make it work

Stakeholders' Highlights

  1. UNICEFCalls for the Protection of Children in the Gaza Strip
  2. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  3. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  4. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  5. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  6. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  7. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia
  8. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector
  9. Swedish EnterprisesEU Tax Proposal on Digital Services Causes Concern for Small Exporting Economies
  10. European Jewish CongressCondemns the Horrific Murder of Holocaust Survivor Mireille Knoll in Paris
  11. Mission of China to the EUAn Open China Will Foster a World-Class Business Environment
  12. ECR GroupAn Opportunity to Help Shape a Better Future for Europe