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Brussels attacks Moody's over Greece downgrade
AFP - Wednesday, June 16
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Brussels attacks Moody's over Greece downgrade
STRASBOURG (AFP) - – The European Union's top economic commissioner Olli Rehn criticised US-based rating agency Moody's on Tuesday for slashing its sovereign debt rating for Greece to 'junk' status.
Rehn told a debate in the European parliament that the decision to cut Greece's rating was both "surprising" and "unfortunate" at a time when EU and IMF auditors were taking a hard look at the country's attempts to slash its debt.
"The timing of Moody's decision is both surprising and highly unfortunate," Rehn told European parliament lawmakers sitting in Strasbourg, France, during a speech on improving audit powers available to EU data agency Eurostat.
He said that the downgrade, which he had discussed with financial services commissioner Michel Barnier and European Commission boss Jose Manuel Barroso, "again raises issues related to the role of credit rating agencies in the financial system."
He said that the commission, which proposes to regulate ratings agencies under wide-ranging, new supervisory architecture due to enter force in 2011, will probe "the level of competition in the sector" and fears that a lack of transparency could represent a "conflict of interest."
The system appears to be "based on the payer-issuer model," Rehn said of doubts there.
Rehn underlined that Eurostat staff resources are immediately being beefed up.
Moody's said that considerable uncertainty about Greek plans, even with the help of an EU-IMF bailout package, to reduce its huge debt and balance its finances justified the ratings cut by four notches from A3 to Ba1.
As bond yields -- the rate of return -- moved higher, Athens swiftly rejected the verdict, saying the government had taken major steps to balance its books.
The downgrade means some investors will no longer be allowed to buy Greek debt under the terms of their investment mandate and could lead to still higher borrowing costs for Athens if it goes to the markets for cash.
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