There goes Portugal: Moody's Investors Service downgraded the country's credit rating on Tuesday, taking it to Ba2 from Baa1. The move comes with a negative outlook as well, suggesting that the cutting isn't over.
According to the Moody's press release, there were two big reasons behind the downgrade: 1. "The growing risk that Portugal will require a second round of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a pre-condition."
2. "Heightened concerns that Portugal will not be able to fully achieve the deficit reduction and debt stabilisation targets set out in its loan agreement with the European Union (EU) and International Monetary Fund (IMF) due to the formidable challenges the country is facing in reducing spending, increasing tax compliance, achieving economic growth and supporting the banking system."
The move comes as credit rating agencies give their downbeat assessments on the plan to keep Greece from defaulting on its debt obligations, with private banks in Germany and France agreeing to rollover existing bonds. Moody's said earlier that such a move might still force banks to take impairment charges, while Standard & Poor's has said that any rollover would still be looked at as a default.
David Berman