EU and UK flagTighter controls on credit ratings agencies should steady volatile markets and cut out conflicts of interest, MEPs have said.

A plan approved by the European Parliament's Economic and Monetary Committee now triggers talks with EU governments and the European Commission on the final terms of new legislation designed to curb agencies' powers.

Italian socialist MEP Leonardo Domenici, who steered the proposals through the Parliament, said: "The debt crisis in the eurozone has demonstrated that credit rating agencies have gained too much influence on the financial markets to the point of being able to interfere in the political agenda. We need to restore a balance here.

"Credit rating agencies should provide an information service to investors and consumers. We don't expect them to give political opinions. Their work should respect rules on quality and transparency but should also be subject to a system of liability."

The European Commission threatened a crackdown last November because a series of ratings downgrades by the main agencies at key moments in the unfolding eurozone crisis were seen as worsening the drama.

EU Financial Services Commissioner Michel Barnier said more competition was needed in the sector, with more accountability by agencies for any mistakes. He even suggested banning such agencies from downgrading countries in the eurozone bail-out scheme.

The draft accord falls short of that but says that as sovereign debt ratings can affect the credibility of nations and increases their borrowing costs, the agencies' pronouncements should reflect national situations and avoid comment on policy changes.

MEPs also want to force agencies to publish annual timetables of dates for publishing its sovereign ratings, to give countries time to prepare for them. But Conservative MEP Ashley Fox warned that a fixed calendar for issuing ratings would make markets more "twitchy". He said: "The commission and some MEPs have sought to overstretch the EU's reach into areas where it is not needed and, at the same, failed to deliver the obvious and limited reforms which could have made a real difference."

While he successfully talked down efforts to ban agencies such as Moody's, Fitch and Standard and Poor from issuing unsolicited ratings at all, Mr Fox said the rest of the proposal was a "wasted opportunity".

The agreed compromise would force them into a strict reporting calendar, adding "needlessly" to market volatility around the report date. The EU would also create its own credit-worthiness authority, a move Mr Fox said would lack independence and therefore credibility.

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