Portugal’s Debt Rating Lowered by Fitch on Finances

Portugal’s credit grade was cut by Fitch Ratings, underscoring growing concern that Europe’s weakest economies will struggle to meet their debt commitments as finances deteriorate.

The rating was lowered one step to AA- with a “negative” outlook, Fitch said in a statement today. The euro extended its decline, weakening 1.1 percent to $1.3355 as of 10:32 a.m. in London. Portuguese bonds fell, with the yield on the 10-year note rising 5 basis points to 4.33 percent. Portugal’s PSI-20 Index of stocks dropped 2 percent.

Euro-region governments including Greece, Ireland, Italy and Spain are seeking to narrow growing budget deficits. Portugal’s deficit is 9.3 percent of gross domestic product, more than triple the European Union’s 3 percent limit. Its economic growth is “significantly below” what is typical for a AA country, reducing its ability to resist the global financial crisis, Fitch said. (more)