Wednesday, July 6, 2011

Portugal hit by 'junk bond' status

Moody's credit rating agency has downgraded Portugal's sovereign debt rate by four notches

Source: Press TV

Portugal's sovereign debt rating has been downgraded to a “junk bonds” status, increasing chances that the country will most likely seek further financial assistance, Moody's Investors Service says.

The credit rating agency cut Portugal's rating by four notches to Ba2, voicing concerns that debt-ridden Portugal would not be able to bring down its deficit without receiving another bailout, Reuters reported.

The agency further linked Portugal's situation with that of other EU nations such as Greece, which is also set to receive its second international bailout package worth EUR 12 billion.

In response to the recent rating, Portugal's finance ministry released a statement criticizing Moody's for ignoring the effects of the country's tax plan.

The statement added that the tax plan “constitutes a proof of the government's determination to guarantee the deficit targets for this year.''

Portugal was forced to seek a bailout loan package from the International Monetary Fund and European Union after the government collapsed in April, causing its borrowing costs to rise dramatically. The loan was worth EUR 78 billion.

Portugal is the third country to succumb to financial troubles in the euro zone debt crisis and seek funding assistance after Greece and Ireland.

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