Credit rating agency Moody's has downgraded Portugal's debt by two notches to A1. It said the decision was based on the country's worsening public finances and weak growth prospects. Moody's said it expected the Portuguese government's debt trend to continue to deteriorate for 'at least another two to three years', with the ratio of debt to gross domestic product eventually nearing 90%. It also expressed concern about Portugal's growth prospects. Portugal's debt previously had an AA2 rating. Meanwhile, the Portuguese central bank raised its 2010 growth forecast for the country but cut its estimate for 2011, citing the impact next year of economic austerity measures. The bank expects growth of 0.9% this year, up from a previously projected 0.4%, and 0.2% in 2011, down from 0.8%. The EU country that has struggled the most through the financial crisis, Greece, raised fresh funds from the markets today in its first sale of government debt since the EU-IMF bailout saved it from default.
The debt issue attracted nearly three times as much investor demand as sought but by offering an interest rate of 4.65% for six-month Treasury bills, which was slightly higher than the last equivalent sale. On April 13 Greece offered a rate of 4.55% for equivalent six-month bills, up sharply from 1.38% in January as the financial markets turned against the debt-stricken country.