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EU promises fundamental reforms of ratings agencies

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(BRUSSELS) - The EU's executive Commission said on Thursday it would propose within six months fundamental reforms on the regulation of financial ratings agencies, as a second eurozone country was hit by a downgrade within days.

"The last few days highlight once again how important (is) a more and better regulated environment for ratings," the economic affairs commissioner, Olli Rehn, and the commissioner in charge of financial services, Michel Barnier, said in a joint statement.

"Our services are now working as quickly as possible" on a package of reform proposals, the statement said, adding that the package was "due before the end of the summer."

Ratings agency Moody's on Monday slashed Greece's credit rating by three notches from Ba1 to B1 and struck again on Thursday, demoting Spain by a notch to Aa2.

The ratings moves come ahead a summit by eurozone leaders on Friday to thrash out the details of a bailout fund to be set up from 2013 to deal with any potential future crises like that seen in Greece.

Greece has called for steps by the eurozone to regulate credit rating agencies after its downgrade, with Finance Minister George Papaconstantinou saying in a letter to the Commission that the ratings agencies were "competing against each other" to predict the next crisis after failing to warn beforehand of the 2008 economic slump.

In their joint statement, the commissioners said the objectives of the reform would be "to seek diversity in this heavily concentrated sector; reduce the overreliance on ratings; improve sovereign debt rating; (and) deal with remaining conflicts of interest."

"We can assure you the reforms will be fundamental and tackle the numerous problems we know exist," the statement said. "We are closely looking too at what the Americans are doing to ensure no regulatory discrepancy."

The statement also said the commissioners were "confident in the actions the Greek government is carrying out as part of its reform package."

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