The ECB has suspended a minimum rating requirement for Portuguese bonds after one of the major credit rating agencies earlier this week downgraded Portugal to ‘junk status’.
The EU Bank has decided to suspend ‘until further notice’ the minimum rating threshold
required for Portuguese bonds. Portuguese EU commission president Jose Manuel Barroso accused American credit rating agency Moody’s of being ‘biased’ and ‘speculative’ for downgrading its assessment of Portugal’s debt payment capacity.
This measure means that the ECB will continue to buy Portuguese bonds regardless of the rating given to them by private agencies – a move already made for Greece. Trichet insisted this extraordinary measure was not being taken because the ECB feared other rating agencies may follow suit and downgrade Portugal, but because the Portuguese ‘adjustment programme’ agreed with the EU and the IMF at the end of June is ‘ahead of the curve’. He noted the programme already deals with privatisations and increased taxes.
These steps are still required in Greece, for which the ECB already last year suspended its minimum rating requirement for buying up Greek bonds.
Along with the Portugal measure, Trichet also announced an increase in the ECB interest rate to 1.5 per cent, the second hike this year.
Asked by an Irish journalist if he feels any sympathy with Irish people, whose country is also subject to harsh EU-IMF austerity measures and who will be hit by the rate increase, Trichet responded: ‘Ireland needs to stick to its programme. I won’t comment further’. No wonder that Micheál Martin accused the ECB of being a ‘young, powerful but increasingly arrogant institution’.
In a tacit admission that saving the Euro was paramount, he insisted that austerity measures work ‘for all the people in the eurozone’, including Ireland where, in a clear signal to the ratings agencies, he said that the current account is now ‘positive’. But he also signalled that the ECB may further increase its interest rate in the coming months, bringing even more pressure upon beleaguered Irish households.The People’s Movement has launched a new pamphlet entitled The European Stability Mechanism and the case for an Irish Referendum (click on the title to access).