Portugal may need to come up with more austerity measures in its 2011 budget to avoid further revision of its credit rating, Moody's Investor Service said after cutting the country's debt by two notches to A1.
Anthony Thomas, vice president of Moody's Sovereign Risk Group told Reuters on Tuesday the upside risks in Portugal, such as a more aggressive fiscal consolidation, now offset downside risks, such as weaker than expected growth and high interest rates.
He also said Portugal remained in the high end of investment grade and Moody's outlook was now stable, which means there is no revision planned for at least 12 months.
David Tinsley, economist at National Australia Bank, said: The downgrade is going to weigh on the euro in the short term and doesn't bode well ahead of the bank stress tests due next week.
(Reporting by Andrei Khalip; editing by John Stonestreet)