By Ray Fleming

ON Wednesday the American credit rating agency Moody's downgraded Portugal's sovereign debt to junk status, causing yet more doubt about Portugal's ability to survive its current financial crisis and reawakening worries about Spain's situation. There was, however, some good news later with Spain successfully selling €3bn of 3 and 5 year bonds and a modest recovery on the Lisbon money market. The climate had apparently been changed by a statement from Jean-Claude Trichet, president of the European Central Bank.

He said: “It is evident there is an element of pro-cyclicality which is embedded in the function of credit rating agencies...it is also clear that a small aligopolistic structure is not what is desirable at the level of global finance.”

If I understand the drift of M. Trichet's words correctly he is telling Moody's to mind their own business at a time that Portugal is under the umbrella of the IMF and EU bailout programme. No doubt he hopes the message reached other agencies such as Fitch and Standard and Poors which routinely sit in questionable judgement on national economies. These agencies are profit-making companies which have a role to play in the United States but should not be pronouncing on national economies which is the task of the International Monetary Fund. Perhaps the IMF's new boss, Christine Lagarde, should have a quiet word with them.

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