ATHENS, Greece — Greece's finance minister on Thursday asked the EU to urgently reform the way ratings agencies are allowed to operate after what he called "unbalanced and unjustified" downgrades of Greece and other struggling European economies.
George Papaconstantinou wrote in a letter, a copy of which was seen by The Associated Press, that a ratings cut of Greek debt by Moody's this week risked creating damaging "self-fulfilling prophesies."
The letter was addressed to European Central Bank chief Jean-Claude Trichet, EU finance commissioners Olli Rehn and Michel Barnier and Jean-Claude Juncker, who chairs regular meetings of the 17 eurozone finance ministers.
On Monday, Moody's downgraded Greece's debt grade further below junk status, slashing its rating by three notches to B1 from Ba1. The agency also cut Spain's rating by one notch on Thursday.
Greece, battling a third year of recession, is seeking to renegotiate the terms of its €110 billion ($152 billion) bailout loan agreement with eurozone countries and the International Monetary Fund.
Greek government bonds have been relegated to junk status by the three major ratings agencies — hurting Athens' efforts to return to the long-term debt markets this year.
European Union support for heavily indebted eurozone members will be discussed at EU leaders' summits on Friday and March 24-25 as well as a finance ministers' meeting next week.
Papaconstantinou argued that Moody's ignored Greece's massive effort to cut costs and reforms its economy.
"Moody's focuses its analysis exclusively on the downside risks," he wrote to the EU officials in English. "I believe it should be an issue of concern for all of us that such decisions can in effect render much more difficult the effort made by Greece and other countries in a similar position to regain access to international markets."
Papaconstantinou did not say what kind of action he thought the EU should take, but Greek officials have in the past called for tougher regulation of ratings agencies and backed the idea of an independent European agency that could operate under the ECB.
"Ultimately, Moody's downgrading of Greece's debt reveals more about the misaligned incentives and lack of accountability of credit rating agencies than the genuine state or prospects of the Greek economy," Papaconstantinou said.
"Having completely missed the build up off risk that led to the global financial crisis in 2008, the rating agencies are now competing with each other to be the first to identify risks that will lead to the next crisis."