Today's Coming Crisis Movie

Wednesday, March 16, 2011

Europe's financial collapse continues: Moody's downgrades Portugal debt rating

Moody's downgraded Portugal by two notches on Tuesday night and warned the country could face “subdued” growth prospects for years.

In a move likely to renew fears about European sovereign debt, the credit rating agency cut Portugal from A1 to A3 on long-term government bonds.

Moody’s gave four reasons for the downgrade, including “implementation risks” for the government’s austerity plan as it faces political opposition, and sluggish economic growth for “some time” until “structural reforms, especially in the labour market and the justice system, begin to bear fruit”.

The report also warned that Portugal may need to provide more financial support for its banking system, and that challenging global economic conditions have increased the country’s financing costs.

Moody’s assigned Portugal a negative outlook, meaning further downgrades are a possibility.

Portugal's socialist minority government faces an onslaught after announcing a new austerity package on Friday. (read more)