Portugal has seen it’s sovereign debt rating downgraded by Moody’s, due to its urgent need to cut debt and it’s poor growth prospects.
The agency, who rate countries based on their economic performance, downgraded Portugal two steps, from an A1 to an A3.
The rating could also fall further they warned, due to a lack of growth potential in the country.
Portugal’s prime minister has warned that his country could soon face a bail-out, but the government’s main opposition party has announced that they will oppose the current parties austerity plans.
The Prime Minister said,”The consequence of a political crisis would worsen the risks for our economy and lead to intervention.”
Portugal is currently trying to avoid falling down the route taken by Ireland and Greece, where they had to call in an international bail-out, and announced debt cutting plans last week.
Speaking about the plans, Mr Socrates, the Prime Minister said, “I have been fighting to avoid this scenario for six months.”
Moodys still rates Portugal two grades above Greece, so it’s not all doom and gloom for the country.
“The cost of market funding is likely to remain high until the deficit has been reduced to a sustainable level and the prospects for economic growth have improved,” said Moody’s in a statement.