International ratings agency Moody's on Tuesday downgraded Portugal's debt rating by two notches, the agency said in London, news which the Lisbon government took calmly, according to dpa. Moody's downgraded the country's sovereign debt from AA2 to A1, citing the country's relatively weak growth prospects and weakening public finances. The A1 classification means that buying Portuguese bonds is still considered safe, pending other variables. But the downgrading could mean that the country will have to promise higher interest payments for money raised on the markets. The downgrade is not as severe as that suffered by Greece, whose debt rating was lowered to junk status by several ratings agencies earlier in this year. Moody's lowered its ratings from A3 to B1 in June, leading to loud protests from the Greek government. Portugal's outlook was "stable" according to Moody's. That means that in the medium term, the agency is not considering further downgrades of its debt. On the stock exchange in Dusseldorf on Tuesday, ten-year Portuguese bonds had yields of five per cent. By comparison, German bonds, with the highest AAA rating, had yields of three per cent, while Greek bonds had yields of over ten per cent. Meanwhile Portugal responded calmly Tuesday to the Moody's decision, with with Finance Minister Fernando Teixeira dos Santos saying it was "not suprising." In remarks made in Brussels while attending a meeting of European Union finance ministers, Teixeira dos Santos, said Moody's decision had been expected, after the credit rating agency had left Portugal's rating unchanged for 12 years. "In my opinion this is a delayed reaction in comparison with the other rating agencies, which however only concludes what the other agencies concluded earlier, and so it is not surprising," the minister said. A statement issued by the Finance Ministry in Lisbon said that Moody's had also sent a "signal of trust" in describing Portugal's outlook as being stable. The ministry statement also defended Lisbon's economic policy course. "Given the current background of uncertainty it must be stressed that the priority of budget consolidation poses a necessary condition for sustained growth, even should this not guarantee a rapid recovery of the Portuguese economy," it said. -- SPA
