© Dukascopy
- Fitch ratings agency
Fitch ratings agency cut Portugal's credit rating to junk status BB+ from BBB- on Thursday citing "large fiscal imbalances" and "high indebtedness across all sectors". This rating is still one notch higher than Moody's rating of Ba2.
"Over the next two years, the recession makes the government's deficit reduction plan much more challenging and will negatively impact bank asset quality," Fitch said in a statement.
"The 2012 budget contains significant expenditure reductions, mainly on pensions and civil service pay. The budget is well-designed and is based on reasonable GDP assumptions. Fitch therefore expects the 4.5 percent deficit target for 2012 to be met," it said.