Fitch Downgrades Portugal on Budget Concerns

Fitch Ratings cut Portugal‘s sovereign credit rating by one notch to AA- on Wednesday, citing budgetary underperformance in 2009 and warning that a similar outcome this year and next could cause another downgrade.

The change underlined concerns that the debt troubles that have afflicted Greece will move to other of the euro zone’s weaker economies, and it drove European stocks and an already battered single currency lower.

The premium Portugal has to pay on its bonds compared to German Bunds briefly hit a high of 129 basis points after the announcement but then began to tighten again, and analysts said the move had been well-flagged by Fitch and still left the rating comparable with other agencies.

Fitch also said the government’s long-term budget austerity plan was broadly credible and it did not expect political instability to upset the passage of the necessary legislation.

Read More: – Reuters