* Barroso - market mood not fundamentals influenced ratings * Comments follow warning of new EU controls on sector

By John O'Donnell

BRUSSELS, May 5 (Reuters) - The president of the European Commission has criticised what he called the deficient work of credit rating agencies, saying they let the dark mood in financial markets cloud their judgement.

Jose Manuel Barroso's remarks, the harshest such criticism from the powerful EU executive, come amid growing frustration among senior officials with rating agencies for downgrading Greece as it teetered on the edge of financial collapse.

Barroso's remarks followed a stark warning earlier in the week from Michel Barnier, the European commissioner in charge of an overhaul of financial services, and further boosted the chances of tougher European controls of the sector.

Deficiencies in their working methods has led to ratings being too cyclical, too reliant on the general market mood rather than on fundamentals - regardless of whether market mood is too optimistic or too pessimistic, Barroso told lawmakers in the European parliament on Wednesday.

The head of the European law-making executive signalled that further controls could be introduced for the industry.

These would go beyond new rules that start later this year which require the agencies to explain how they arrive at the ratings that can determine a country's financial survival.

We have also launched a reflection on whether further measures may be needed to ensure the appropriate rating of sovereign debt in particular, he said.

In his role as president of the executive for 27 European countries, Barroso has significant power in deciding how rating agencies are allowed to do business.

Earlier in the week, Barnier had warned credit rating agencies to watch their step when judging a country's financial health, saying the commission would probe how they work and could even set up a central agency to take on their job.

Barnier signalled his dissatisfaction that just three companies -- Standard & Poor's, Moody's and Fitch -- dominate the industry.

Debt-laden Greece, which was last weekend bailed out by a 110 billion euro ($147 billion) rescue from European neighbours and the International Monetary Fund, has been marked down to junk status by S&P and now hovers close to Pakistan in the credit stakes.

Rating agencies had been blamed for carelessness in the run up to the global crash, handing out over-generous ratings on the packets of mortgage and consumer debt that subsequently unravelled, sending the economy into a spin.

(Editing by Jason Webb) ($1=.7508 Euro)

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