Moody’s warns Portugal rating may be cut

| December 21, 2010 | 0 Comments
Moody's warns Portugal rating may be cut

Moody’s Investor Service has today put Portugal under review, warning that it may cut its rating by one or two notches.

Investors have been nervous over recent weeks as Portugal’s borrowing costs surge and there have been suggestions that it might be forced to seek an emergency bailout, like Greece and Ireland.

However, the country’s Government has denied the claims.

Meanwhile, Moody’s has warned that the tough austerity measures, which the Portuguese Government has introduced to bring the deficit down, will slow economic growth next year.

The Portuguese Government is aiming to cut the country’s deficit from 9.4% to 4.6% by the end of 2011.

Commenting on its decision, Anthony Thomas, Moody’s lead analyst for Portugal, said: “In Moody’s opinion, Portugal’s solvency is not in question.

“But the likely deterioration in debt affordability over the medium term and ongoing concerns about the economy’s ability to withstand fiscal consolidation and private sector deleveraging mean its outlook may no longer be consistent with an A1 rating,” he added.

The euro dipped following the announcement.

In related news, Moody’s recently downgraded the ratings on five Irish banks – Allied Irish Banks, Bank of Ireland, EBS Building Society, Irish Life and Permanent and Irish Nationwide Building Society.

Last week, the agency slashed Ireland’s credit rating by five notches to Baa1, from Aa2 – citing ongoing uncertainties over the country’s public finances, while last week it warned it may downgrade Spain’s sovereign debt rating from Aa1.

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