Ratings agency Standard & Poor's on Friday cut Portugal's sovereign credit outlook down to negative from stable, citing complications to the country's "already-challenging policy-making environment" following the resignations this week of two key government ministers.
“We believe that growing political uncertainty could derail Portugal’s forthcoming debt issuance and its hoped-for exit in 2014 from the Troika-sponsored support program,” S&P said in a statement.
Portuguese Foreign Minister Paulo Portas handed in his resignation on Tuesday. The government No. 2 quit his post just 24 hours after Finance Minister Vitor Gaspar, the architect of the country's 78 billion euro ($100 billion) bailout plan, also made a shock exit.
The revised outlook means S&P could cut Portugal's BB credit rating if growing political uncertainty slows its efforts to put its fiscal house in order and undermines support from official lenders, including the European Union and the International Monetary Fund.
The negative outlook reflects the ratings agency’s view that there is now a more than one-in-three chance that it could downgrade Portugal within the next 12 months.
“We could consider lowering the ratings if Portugal's political and social tensions lead to significant departures from the Program terms, delaying disbursement of official funding. Political instability could also delay the 2014 budget, further increasing the general government deficit. This could push the public debt ratio higher next year and potentially increase it even further in 2015 or later, which could challenge Portugal's access to further loans from official creditors, after the current financial support program period,” the statement said.
Moran Zhang is a finance and economics reporter at The International Business Times. Her work has appeared in the Wall Street Journal Digital Network’s MarketWatch, United...