July 13 - The European Commission has called Moody's latest downgrade of Ireland's credit rating ''incomprehensible'' as fears also grow over the stability of Italy's economy. Andrew Potter reports.
Ratings agency Moody's has downgraded Ireland's credit rating to junk status. That's led to a stinging response from the European Commission which is critical of the role ratings agencies are playing in the European debt crisis. SOUNDBITE: EUROPEAN COMMISSION SPOKESPERSON PIA AHRENKILDE HANSEN SAYING (English): "Yesterday's decision by Moody's to downgrade Ireland's credit rating is in the present view incomprehensible. Its, and in the Commission's view of course, its timing as the second quarterly review mission is preparing to announce its findings is to say the least questionable." Europe's largest economy Germany pays the most to keep the growing list of crippled economies afloat. Oliver Roth is a trader at the Frankfurt Stock Exchange and says the Irish downgrade is no cause for alarm. SOUNDBITE: OLIVER ROTH, MAIN TRADER FOR CLOSE BROTHERS SEYDLER BANK AG, SAYING (English): "The downgrade of Ireland is not a big surprise for us because it's obvious to us the ratings agency is using a double standard for Europe and for the USA so it won't be a big problem because what we say in Europe is that Ireland has positive elements in their restructuring of the economy so there's hope for Ireland." Greece, Ireland and Portugal have all received EU and IMF bailouts. A country which could dwarf their problems is Italy - the euro zone's third largest economy. A financial crisis there would overwhelm the bloc's existing rescue funds. On Friday the Italian government and opposition parties will try to introduce an austerity plan with 40 billion euros in spending cuts to help ease market anxiety. Mario Draghi is Governor of the Bank of Italy, and will become the next European Central Bank president. SOUNDBITE: EUROPEAN CENTRAL GOVERNING COUNCIL MEMBER MARIO DRAGHI, SAYING (Italian): "Our banks are stable. They have survived without any real damage from the financial crisis that has shaken large foreign banks. We have fundamental resources that have always characterised Italy." European Union leaders are due to meet on Friday to wrangle over the details of a second Greek bailout package, and whether private holders of Greek government bonds should shoulder their portion of the cost. But Germany says it won't be rushed over the details of that second bailout, meaning the leaders' meeting might not happen at all. Andrew Potter, Reuters