Portugal’s credit rating has been cut for the second time this week as a political crisis in the country raises fresh concerns over the sovereign debt woes and a potential bailout, according to Financial Times. On Thursday, Standard & Poor’s slashed Portugal’s credit rating by two notches from A- to BBB, which is the lowest of any ratings agency and came with a negative outlook as well. The move comes as Prime Minister Jose Socrates resigned amid political discord over austerity measures, and S&P said the government would need “additional fiscal consolidation measures” to meet targets. The agency forecast for a 2% economic contraction for Portugal this year.
Meanwhile, European Union leaders delayed finalizing changes to the European Financial Stability Facility until June and extended the deadline for paying into the replacement fund, the European Stability Mechanism, adds Reuters. The agreement will stall the previously planned expansion of the EFSF to €440 billion from €250 billion, and will give countries five years to contribute the €80 billion in capital required of each country for the ESM. The delay comes despite mounting pressure on Portugal to accept international aid, but reflects independent political compromises benefiting Germany and Finland.
Click here to read the story on Portugal’s downgrade from Financial Times.
Click here for coverage of the emergency aid fund from Reuters.