Credit rating agency Fitch has lowered Portugal's long-term debt rating, saying a 'sizeable fiscal shock' had reduced the euro zone country's creditworthiness.
The Lisbon stock market plunged more than 2% after the agency downgraded Portugal's long-term ratings from AA to AA-. The euro also fell under $1.34 for the first time in more than 10 months, sinking as low as $1.3336 this evening.
Fitch analyst Douglas Renwick said Portugal had not been disproportionately affected by the global economic crisis, but its recovery prospects were weaker than other EU countries. He said this would put pressure on its public finances over the medium term.
The downgrade came one day before an EU summit meeting which will be dominated by a deep crisis in the euro zone triggered by a debt and deficit crisis in Greece.
Portugal's public deficit reached 9.3% of gross domestic product in 2009 compared with Fitch's September forecast of 6.5% and a euro zone limit of 3%.
Fitch also gave Portugal a negative outlook - meaning it could face a further downgrade.
