Standard and Poor’s put Portugal’s credit rating under “negative watch”

23 September 2013

Standard and Poor’s (S&P) has put Portugal’s “BB” credit rating under negative watch after saying there was a 50 percent probability of having to lower its rating, the agency said in a statement issued last week.

Not meeting the targets outlined by Portugal’s financial bailout programme could increase uncertainty about the development of sovereign debt and increase the likelihood of Portugal needing a second bailout, said S&P.

If this is the case, the credit rating downgrade would put Portugal in a more difficult position in terms of leaving the bailout programme in the next year and gaining full access to capital markets, as the credit rating given by the agencies is a tool for investors to assess the ability of a State or company to repay its debts.

Germany’s Commerzbank also said it believed it was likely Portugal would need a second bailout as political uncertainty increased and added that the country could not avoid a “precautionary” credit line when the current bailout programme ends in 2014.

“Portugal will need at least one precautionary line, but the likelihood of a second bailout are increasing,” an analyst from the German bank, David Schnautz, told Portuguese financial newspaper Diário Económico, and according to him Portugal gaining full access to the markets is now being played out in the “political arena.” (macauhub)