Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Portugal's finances slump lower

Ap
Wednesday 06 July 2011 10:59 EDT
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Portugal's financial plight deepened today with borrowing rates jumping higher and stocks slumping after its bonds were downgraded to junk status.

Spain and Italy were dragged into the downturn, adding new momentum to Europe's sovereign debt crisis.

Portugal's hopes of slowly emerging from its debt crisis were knocked by ratings agency Moody's, which downgraded Portugal's debt four notches and said the country will probably follow Greece in needing a second rescue package.

After the abrupt worsening of Portugal's financial situation, neighbouring Spain immediately suffered a knock-on effect, with Madrid's main stock index down and bond yields up. Spain, a much bigger country, until now has managed to dodge major fallout from the continent's fiscal woes.

The jitters were even felt in Italy, where stocks were down on concerns that spending cuts might not be enough to bring down high debt.

The idea that the crisis might grow to engulf larger economies is a looming threat for markets. Rescuing Spain and Italy would be many times more expensive than all the bailouts the EU has paid for so far.

"The increasing risk is Italy gets caught up further in the contagion, and the bond market vigilantes dictate a more abrupt pace for its adjustment," said Alan Ruskin, an analyst at Deutsche Bank.

The Moody's downgrade - viewed by some analysts and officials as unexpectedly harsh - triggered new outrage in Portugal, where austerity measures over the past year have included tax hikes, pay freezes and welfare cuts.

Portuguese Prime Minister Pedro Passos Coelho said the downgrade was "like a punch in the stomach." Fernando Faria de Oliveira, the head of Portugal's largest bank, the state-owned Caixa Geral de Depositos, called it "immoral and insulting."

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in