Portugal debt rating cut as eu bailout nears

Portugal’s credit rating was cut by Moody’s Investors Service for the second time in three weeks amid expectations it will be unable to avert a European bailout.

Moody’s downgraded Portugal’s long-term government bond ratings by one level to Baa1 from A3, and said it’s considering another cut. Today’s move put the country at the same level as Ireland, Russia, Mexico and Thailand. Fitch Ratings on April 1 downgraded Portugal three notches to BBB-, the lowest investment grade, and maintained the “rating watch negative.”

“Moody’s rating action was driven primarily by increased political, budgetary and economic uncertainty,” the company said in an e-mailed statement today. It expects the winner of June 5 elections to tap the European Financial Stability Facility with “urgency,” and that Portugal will be able to get support from other euro members before then if necessary.

Investors are increasing bets Portugal will follow Greece and Ireland into seeking a rescue as its borrowing costs surge to record highs. Socialist Prime Minister Jose Socrates resigned last month after Parliament rejected his austerity measures needed to tackle the deficit.

Source: Bloomberg