Just a step behind the Chi­nese as usual, and just in time to kill a mod­est EURUSD rally. Also on the same day as the first mass strike in Por­tu­gal which reminds us that every­one will want a piece of the debt reduc­tion pie.

From Reuters:

Rat­ing agency Fitch down­graded Portugal's rat­ing to junk sta­tus on Thurs­day, cit­ing large fis­cal imbal­ances, high debts and the risks to its EU-mandated aus­ter­ity pro­gram from a wors­en­ing eco­nomic outlook.

Fitch cut Por­tu­gal to BB+ from BBB-, which is still one notch higher than Moody's rat­ing of Ba2. S&P still rates Por­tu­gal invest­ment grade.

Fitch said a deep­en­ing reces­sion makes it "much more chal­leng­ing" for the gov­ern­ment to cut the bud­get deficit but it still expects fis­cal goals to be met both this year and next.

"How­ever, the risk of slip­page — either from worse macro­eco­nomic out­turns or insuf­fi­cient expen­di­ture con­trols — is large," Fitch said.

Portugal's 10-year bond yields rose sharply to around 13.15 per­cent after the down­grade from 12.71 per­cent late on Wednes­day, with the spread over bench­mark Ger­man bunds ris­ing 21 basis points on the day to 1,095 basis points.

Por­tu­gal sought a 78-billion-euro bailout from the Euro­pean Union and IMF ear­lier this year and has adopted sweep­ing aus­ter­ity mea­sures to bring pub­lic accounts under control.

Under the loan pro­gramme Por­tu­gal must cut the bud­get deficit to 5.9 per­cent of gross domes­tic prod­uct this year from around 10 per­cent in 2010. Next year it must cut the deficit fur­ther to 4.5 percent.

Fitch said the state-owned "enter­prise sec­tor is another key source of fis­cal risk" and has caused a num­ber of upward revi­sions to the country's debt and bud­get deficit fig­ures this year. The gov­ern­ment has said there was an unex­pected fis­cal short­fall of about 3 bil­lion euros this year.

"Given these down­side risks, Fitch sees a sig­nif­i­cant like­li­hood that fur­ther con­sol­i­da­tion mea­sures will be needed through the course of 2012," Fitch said.

In the mean­time, Syn­tagma goes to Lis­bon where, unlike Italy, aus­ter­ity does not mean increas­ing the retire­ment age by 48 days every year for the next 15.

Por­tuguese work­ers launched a gen­eral strike on Thurs­day to protest against aus­ter­ity mea­sures imposed as the price of an EU bailout designed to keep Por­tu­gal afloat and stem a deep­en­ing euro zone debt crisis.

Planes were grounded, trains halted and pub­lic ser­vices inter­rupted as work­ers across the nation of 11 mil­lion protested against job losses, tax and pay cuts agreed between Por­tu­gal and the troika of lenders — the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and Inter­na­tional Mon­e­tary Fund.

All inter­na­tional flights to and from Lis­bon and Porto were can­celled for the dura­tion of the 24-hour walk­out, accord­ing to the web­site of the air­port author­ity ANA, and only min­i­mum ser­vices con­nect­ing main­land Por­tu­gal with the islands of Madeira and the Azores were operating.

"The strike is gen­eral, the attack is global!" chanted pro­test­ers in a picket line at the Lis­bon air­port, refer­ring to what unions say is an attack on work­ers' rights.

Snap­shot of Por­tugese bond spread to Bund on viagra:

Read more from the author/contributor here.

Comments

Comments are closed.