Moody’s downgraded Portugal’s sovereign debt by two notches overnight, increasing the pressure on the country, which may soon need to go to the EU and IMF for support.
The downgrade, from A1 to A3, also contains a negative outlook as Moody’s thinks Portugal will struggle to make structural reforms to revitalize its economy.
It’s a reminder that while eyes may be on the Middle East and Japan, the European crisis is still very much alive.
The downgrade has halted the bank share rebound in Europe, with Santander and BBVA in the negative in Madrid trading.
Portuguese bonds had been tightening, in the wake of a somewhat better than expected result out of last week’s euro summit.