Crisis-hit Portugal, Ireland ratings cut
Lisbon, April 2, 2011
Credit rating agency Fitch has downgraded Portugal saying the debt-laden country needed a bailout, while rival agency S&P cut Ireland's rating after bank stress tests revealed another black hole.
Despite a successful Portuguese debt sale yesterday, Fitch slashed its rating to the lowest investment grade rank of BBB-.
'The severity of the downgrade by three notches mainly reflects Fitch's concern that timely external support is much less likely in the near term following yesterday's announcement of general elections to take place on June 5,' said Douglas Renwick, director in Fitch's Sovereign Ratings Group.
'The agency views external support as necessary to bolster the credibility of Portugal's fiscal consolidation and economic reform effort, as well as secure its financing position,' Renwick said in a statement.
Portugal sold 1.645 billion euros ($2.34 billion) of short-dated bonds, but had to offer an interest rate of 5.79 per cent, lower than other current market rates but 2.5 percentage points more than it paid at auctions of similar bonds last year.
Standard & Poor's stripped Ireland of its last 'A' rating but the one notch cut and stable outlook was less severe than feared and it gave the thumbs up to stress tests which on Thursday showed its four troubled banks needed a further 24bn euros to be properly capitalised.
S&P said the assumptions underlying the latest round of tests were robust.
But rival agency Fitch took the shine off S&P's modest downgrade when it warned it could cut its BBB+ rating on the back of weaker growth and a jump in the bank bailout costs.