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Portugal opens inquiry into rating agencies

A protester holds a banner reading "strike" as he takes part in a demonstration in downtown Lisbon on November 24, 2010. Portugal's first mass general strike in more than two decades brought the country to a halt today to protest spending cuts the government says are vital to avoid financial disaster.

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Portuguese authorities have opened a criminal inquiry into three international credit rating agencies following a complaint, the Attorney-General's office said Monday.

The inquiry is based on a complaint filed last month by four Portuguese academics, an official with the Attorney-General's office said on condition of anonymity, in keeping with departmental regulations.

The four economists claimed the agencies - Moody's, Standard & Poor's and Fitch - caused severe financial losses for Portugal and demanded to know whether they profited from the ratings.

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They also complained that the agencies dominated the ratings market and want to know whether competition rules were broken.

The inquiry will determine whether there is evidence for charges to be brought. The official declined to provide further details because the investigation is confidential.

The agencies downgraded Portugal's creditworthiness over the past year, helping to drive its borrowing costs to unsustainable levels as investors demanded high returns for lending to a country viewed as risky.

Portugal is taking a €78-billion ($107-billion) bailout to ease its financial difficulties.

The U.S. Congress also has examined the role played by rating agencies in the 2008 financial crisis when they were discredited for giving high ratings to risky securities tied to subprime mortgages. In March, the U.S. Securities and Exchange Commission recommended that the influence of the big three rating agencies be reduced.

Associated Press

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