Europe attacks 'mad' credit ratings agencies

The downgrading of Portugal's debt to 'junk' status by Moody's earlier this week has led to renewed criticism, this time from the European Commission (EC), of the role and behaviour of credit ratings agencies.

The Commission said the timing of the downgrade was "questionable" and raised the issue of the "appropriateness of behaviour" of agencies in general.

Earlier, Greek Foreign Minister Stavros Lambrinidis said the agencies' actions in the debt crisis had been "madness" and tantamount to "self-fulfilling prophecy".

On Tuesday, Moody's - one of three main ratings agencies alongside Standard & Poor's and Fitch - downgraded Portugal's debt to 'junk' status, citing worries that the country may need a second bail-out.

"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," said Commission spokesman Amadeu Altafaj.

"This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies."

Commission President Manuel Barroso added Moody's actions "added another speculative element to the situation".

Earlier, Greek Foreign Minister Lambridinis, speaking at a conference in Berlin, also criticised the behaviour of agencies.

He said Moody's had made an "assumption that Portugal would need a second bail-out", a move that had "the wonderful madness of self-fulfilling prophecy" because it made it harder for Portugal to borrow to keep afloat.

Credit ratings agencies have come under fire previously, both for their role in exacerbating financial turmoil, and over a perceived failure to spot the real market risks.