Portugal May Be Cut by Moody’s as Contagion Spreads
May 5th, 2010Via: Bloomberg:
Portugal may have its credit rating cut by Moody’s Investors Service as the country struggles to reduce its budget deficit and revive economic growth a sign that contagion from the Greek crisis is spreading.
Moody’s today placed its Aa2 rating on review for a possible downgrade, a process that will conclude within three months, the company said in a statement. The rating is currently the third-highest investment grade.
Investors are shifting their attention to Portugal after surging bond yields forced Greece to seek a 110 billion-euro ($142 billion) bailout from the euro region and the International Monetary Fund. The extra yield that they demand to hold Portuguese bonds over German bunds last week rose to the highest since 1997 and Bundesbank President Axel Weber today warned that the euro region faces “grave contagion effects.”
“Today’s rating action reflects the recent deterioration of Portugal’s public finances as well as the economy’s long-term growth challenges,” Moody’s said. The company “believes that increased risk discrimination in the financial markets may raise Portugal’s financing costs for some time to come.”
