Europe declares war on rating agencies

A chorus of policy-makers from Europe and across the world have denounced Moody's drastic downgrade of Portuguese debt as an act of financial vandalism, accusing the "Anglo-Saxon" rating agencies of driving states into bankruptcy and destabilising the global system.

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. Yields on Irish two-year bonds surged above 15pc of the first time. Italian borrowing costs reached levels not seen since the aftermath of the Lehman crisis in late 2008. Yields on Spain's 10-year bonds jumped 12 basis points to 5.59pc.

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