Bad grades
April 5, 2011
The credit rating agency Moody's reduced Portugal's credit rating by one notch on Tuesday, dropping it to a Baa1 rating from A3.
An unfavorable rating means a government will have to pay more interest on its debt, as investments in its bonds is seen as riskier.
Moody's also cautioned that Portugal could face another downgrade because of political, budgetary and economic uncertainties, as Portugal struggles to implement stringent deficit reduction measures. Tuesday's drop is the second for Portugal's credit rating by Moody's in a month.
The lack of faith by Moody's and other credit institutions shows the difficulty Portugal will have in confronting its deficit problem. The other two global ratings agencies, Standard and Poor's and Fitch, have also downgraded Portugals debt.
Greece and Ireland saw their credit ratings similarly reduced before they were forced to request bailouts from a eurozone rescue fund, and there are fears that Portugal may soon have to do the same.
Two weeks ago, Jose Socrates resigned as Portugal's Prime Minister after a no-confidence vote on his austerity plans. Last week, Portuguese President Anibal Cavaco Silva announced the country would hold fresh elections on June 5.
Silva said the caretaker government would not have the authority to request a bailout.
Author: Matt Zuvela (AP, AFP)
Editor: Nicole Goebel