Moody's Slashes Portugal Debt to 'Junk'

The rating agency cites a "growing risk" the nation will need a second bailout

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Moody's has downgraded Portugal's national debt to "junk status" on Tuesday, citing a "growing risk that Portugal will require a second round of official financing before it can return to the private market." Citing concerns that the country will miss targets for debt stabilization and deficit reduction as laid out by the European Union and the International Monetary Fund, Moody's slashed Portugal's rating four levels from "Baa1" to "Ba2." U.S. stock markets saw a small dip with the news, and the Euro fell from $1.4488 to $1.4459.

The last time Moody's made such a dramatic cut in a country's rating came on June 14, when the rating agency dropped Greece's rating four notches to "Ba1," also in junk territory. Greece's prime minister announced the following day that he would install a new government, and the country received a second bailout package worth $156 billion from the EU and IMF nine days after that. Portugal's rating is now one notch lower than Greece's before their second bailout.

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