Posted on July - 05 - 2011
Moody’s slashes Portugal rating by four notches
PARIS – MOODY’S Investors Service on Tuesday slashed its credit rating on indebted euro zone struggler Portugal, bailed out earlier this year, by four notches to Ba2 from Baa1, warning it could be lowered further.
Moody’s said the downgrade reflects ‘the growing risk that Portugal will require a second round of official financing before it can return to the private market (to raise financing)’.
The action, it said, was also based on increased concerns Lisbon would not meet deficit reduction and debt stabilisation targets agreed with the European Union and International Monetary Fund due to the ‘formidable challenges the country is facing in reducing spending, increasing tax compliance, achieving economic growth and supporting the banking system’.
In April, Moody’s cut Portugal by one notch from A3 to Baa1 as it expected Lisbon to have to seek outside help to resolve its debt problems, which it duly did, securing 78 billion euros (S$138 billion) from the EU and IMF after Greece and Ireland were rescued in 2010.
The ratings agency said on Tuesday its main concern was that Lisbon would require a second bailout, just as Greece now does, and that private sector creditor banks would have to take some of the pain.
Moody’s noted in a statement ‘that European policy-makers have grown increasingly concerned about the shifting of Greek debt held by private investors onto the balance sheets of the official sector. — AFP
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