PARIS — Standard & Poor’s said Tuesday that it had cut its sovereign credit ratings for Portugal and Greece, piling further pressure on the two countries as they seek to come to grips with a heavy debt load, weak economies and moribund banks.
S.&P. cut Portugal’s rating to BBB- from BBB, with a negative outlook, the agency’s second downgrade of the country since Friday. BBB- is the agency’s lowest investment grade rating, and is just one notch above “junk.” The Greek rating, which had already been cut to junk, was lowered to BB- from BB+.
Richard McGuire, a fixed income strategist at Rabobank in London, said the steps confirmed investor perceptions that Greece would have to default on some of it debt and that a similar outcome was “increasingly likely” for Portugal. He added that the European bailout mechanisms were inadequate, likening them to attaching a first-aid bandage “to a festering wound.”
“It’s a liquidity solution to a solvency problem,” he added.