P is for Portugal. And problems.
NEW YORK (CNNMoney.com) -- Just when investors thought it was safe to stop worrying about Europe, Wall Street got a reality check from credit rating agency Fitch.
Stocks dipped Wednesday morning and the primary reason was Fitch's downgrade of the default ratings of Portugal, which is a member of Europe's debt-ridden PIIGS club.
ntil now, Portugal hasn't gotten nearly as much attention as the G in the PIIGS group: Greece. (Ireland, Italy and Spain are the remaining European PIIGS.)
There are still concerns about whether the European Union will lead a rescue package of Greece or if the International Monetary Fund will have to step in instead. But in its report, Fitch pointed out that Portugal's debt problems are also significant.
"A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," said Douglas Renwick, associate director in Fitch's sovereign team, in the report.
Fitch noted that Portugal's government deficit was 9.3% of its gross domestic product last year, well above Fitch's forecast of 6.5% from last September. The rating agency added that another downgrade was possible later this year or in 2011 if Portugal did not get its fiscal house in order.
o why does Portugal, a nation with about 11 million people that's roughly the size of Indiana, matter? As was the case with Greece, the concern is that its fiscal problems won't be contained.
Since Portugal, like Greece, is a member of the group of countries that use the euro currency, any problems with one euro constituent -- let alone five -- can spread and have a disastrous effect on the entire currency.
Enviado: 25/3/2010 1:10
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