EU: No Mood for Moody's

Rating agency Moody's drastic downgrade of Portugal to junk bond status is being seen an act of financial vandalism.

Wolfgang Schauble, German finance minister, said there was no justification for the four-notch downgrade or for warnings that Portugal might need a second bail-out. "We must break the oligopoly of the rating agencies," he said.

Heiner Flassbeck, director of the UN Office for World Trade and Development, said the agencies should be "dissolved" before they can do any more damage, or at least banned from rating countries.

Moody's downgrade late on Tuesday set off immediate contagion to Ireland, with dangerous ripple effects across southern Europe.

Portugal's new premier, Pedro Passos Coelho, said Moody's downgrade was a "punch in the stomach" at a time when the new government has done everything demanded by the EU/IMF inspectors.

Jose Manuel Barroso, the European Commission president, questioned Moody's motives and said it had fanned the flames of "speculation" with an unwarranted downgrade. "It seems strange there is not a single rating agency coming from Europe. It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe," he said.

The Commission is drawing up laws to clamp down on the agencies. These will now be tougher. "Developments since the sovereign debt crisis show we need to take a further look at reinforcing our rules," said Mr Barroso.