Before we all join the chorus of abuse against the robber agencies, let us not lose sight of what is happening in the eurozone. The EU authorities are attempting to muzzle free opinion, first by threatening Fitch, Moody's, and S&P with vague retribution, and then by drafting restrictive laws to prevent them from publishing unwelcome messages.

It is financial repression, pure and simple. The same will be done to the press in due course. Then to you, dear reader.

"We must break the oligopoly of the rating agencies," says German finance minister, Wolfgang Schäuble. By "we", of course, he means the EU apparatus of coercion.

The European Commission has already created a pan-EU oversight body with binding powers to breathe down the necks of these agencies. It will draft restrictive legislation by the end of the year. The Portuguese downgrade ensures that it will be even nastier." Developments since the sovereign-debt crisis show we need to take a further look at reinforcing our rules," said Commission chief Jose Manuel Barroso.

Mr Barroso came close to accusing the agencies of cartel activities and a malicious agenda.

"It's quite strang that the market is almost dominated by only three players. It seems strange that there is not a single rating agency coming from Europe. It shows that there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe."

Leaving aside the not-small matter that Fitch is owned by the French group Fimalac (quoted on the Paris bourse), or that it is largely run by Britons who belong to the EU and contribute to Mr Barroso's salary, this talk of anti-European bias cannot pass unchallenged.

Currency unions switch exchange risk into default risk. The rating on countries in currency unions ought to be lower therefore (ceteris paribus). States with their own sovereign currency and debt in their own currency can let the exchange rate take the strain when they get into trouble, as the US and the UK have done. Foreign investors lose money on the exchange rate. There may be all kinds of risks and dangers in the US and the UK, but default is not high on the list (discounting the US soap opera over the debt ceiling).

This not the case at all for EMU laggards. They cannot devalue or inflate away debt. The stress shows up in the bond markets instead. The more relevant comparison in this respect is between the Euroland's Club Med states and California. The Anglo-Saxon agencies do not rate many US states at AAA. California is A- and may lose that soon enough.

To compare the ratios of national debt to GDP levels in the Anglosphere with those in Europe, as the EU elites tirelessly do, is to the miss the point.

My gripe against the agencies is not that they are downgrading all these semi-bankrupt states today, but that they totally failed to signal the inherent dangers of EMU a long time ago when the crucial investment decisions were being made. They too were swept up by euro euphoria. They too failed to understand the inherent structure of monetary union, or to spot obvious warning signs as the drama unfolded and the North-South divide became ever-more apparent. They handed out AAAs like confetti.

That is the great indictment of Fitch, S&P, and Moody's in this sovereign saga, especially Moody's (which has since replaced much of its French-led sovereign team). Moody's still had a A3 rating on Greece in May 2010. Unbelievable.

I have great sympathy for the Portuguese. They did not have a demented credit and property boom during the roaring noughties (yes, they did earlier). They did not cheat on the deficit figures. They do indeed have bloated a public sector but basically the cause of their disaster is having locked into EMU in the mid-1990s before they were ready. They lost control of monetary policy and have been the victims of a dysfunctional currency union ever since.

Parts of their light manufacturing industry have been wiped out by Chinese imports, flooding Portugal at an exchange rate of 9 or 10 yuan to the euro. Portugal needs a 50pc devaluation against China.

The Portuguese have shown impressive stoicism since the crisis erupted. They have knuckled down under the new free-market government of Pedro Passos Coelho, complying diligently with the demands of the EU/IMF inspectors. (Pointlessly, in my view. They should simply leave the euro and put an end to the misery. But that is another matter.)

Yet, out of the blue, Moody's cuts them four notches to junk status, and precipitates an explosive rise in yields across the maturity curve. A "punch in the stomach" said Mr Passos Coelho. Indeed.

But let us be clear. The EU itself brought this about by declaring war on the very investors needed to finance the vast borrowing needs of the European project. By baying for the blood of bankers and "speculators" (ie pension funds and the like who bought Greek, Portuguese, and Irish debt in good faith), Chancellor Merkel has set off capital flight and raised the spectre of defaults. Her specific demands for "burden-sharing" by Greece's private creditors (and therefore Portugal and Ireland next) have changed the landscape. The agencies have no choice at this stage. Their job is signal default risk.

The ECB has warned tirelessly that attempts to punish investors in this fashion would back-fire horribly, set off a fresh contagion, and potentially spiral out of control. This is where we are today as Club Med bond yields go haywire again. Governments need to love and caress bond-holders, not spit at them.

By the way, holders of Greek and Portuguese long-term debt have already lost half their money based on current resale values.

What should have been done is obvious. The EU's bail-out fund should have been given powers mop up the bonds of countries in distress on the open market at a hefty discount (as the ECB suggested). Investors would have suffered condign losses, and the EU could have given Greece debt relief by retiring bonds with no net loss to European taxpayers.

This elegant solution was blocked by Germany because it was seen as a slippery slope towards a Transfer Union, and might have violated the Grundgesetz. (In a sense the Germans are right, but you shouldn't join a currency union in the first place if don't realize that it implies fiscal union.)

Now, if the EU institutions wish to avoid being held hostage by the robber agencies they should stop using the ratings as a basis for lending collateral at the ECB. They should create their own more rigorous method of assessing credit-worthiness, ignore the agencies altogether, and make their case directly to global investors.

What the EU should not do is try to muzzle free opinion, or free speech. We are on a slippery slope.