It was also the second downgrading by S&P for Portugal in one week. The rating agency said that the cuts were required as a result of concerns that investors could be hit by restructuring of the EU’s new permanent bail-out fund.
Portuguese caretake Prime Minister Socrates said he was determined not to request a bail-out from the EU and the IMF. Greek Prime Minister Papandreou reacted furiously. ‘We have seen the rating agencies descending from euphoria to the panic of risk’, he said after a meeting in Athens of members of the Socialists & Democrat Group in the European Parliament. ‘Only two years ago they were rating AAA all the toxic bonds that created the financial crisis’, he continued according to the Greek daily Kathemerini.
Credit rating agencies have been widely blamed for their role in the financial crisis which has swept the world since 2007. They are accused of over - estimating borrowers’ capacity to pay back their loans and also of conflicts of interest, being paid as consultants by the banks whose debt they rate.
The agencies entered the EU financial struggle when they decided a year ago to downgrade Greek debt to ‘junk’ status, shaking the EU financial markets. EU Internal Market Commissioner Barnier promised then to formulate proposals to put credit rating agencies under control of an EU agency.
The reaction of the European Commission on this week’s ratings cut was: ‘we don’t share the assessment, we have our own assessment and it is not the one of the agency’. The spokesman added that credit rating agencies have an important role to play and that the Commission was making progress on preparing legislation that would better regulate the rating agencies. Athens and Lisbon will be happy to hear that…
Standard & Poor′s: Greece and Portugal worth less than Egypt!
The EU member states Greece and Portugal saw their credit ratings slashed by rating agency Standard&Poor's on Tuesday. The cut, places these countries below Egypt, still involved in a revolutionary process, with a toppled leader and the army in power.
Credit rating agencies have been widely blamed for their role in the financial crisis which has swept the world since 2007. They are accused of over - estimating borrowers’ capacity to pay back their loans and also of conflicts of interest, being paid as consultants by the banks whose debt they rate.
