Nov. 24 (Bloomberg) -- The European Union said it is in the best position to assess the economic situation in Portugal after the nation’s credit rating was cut to below investment grade by Fitch Ratings.
“We have more information, more updated data from the Portuguese authorities,” Olivier Bailly, a spokesman for the European Commission, told reporters today in Brussels when asked about Fitch’s downgrade of the long-term rating of Portugal by one level to BB+ from BBB-. “We are on the ground, we are working with the Portuguese authorities and we know quite well the situation,” he said.
“We are better placed than any other institutions to assess the situation,” Bailly said.
Fitch cited Portugal’s “large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook” in reducing its credit rating. The nation’s rating was cut to below investment grade in July by Moody’s Investors Service, while Standard & Poor’s cut the country’s rating twice in March to BBB-, one level above junk status.
Noting that different agencies’ ratings “are not always in line,” Bailly said the EU “put forward some proposals last week to clarify the methodology and the different criteria used by rating agencies when it comes to the evaluation of member states under financial assistance from the EU and the IMF.”
While the economic reforms Portugal is undertaking “are very difficult,” the measures are “there to ensure the stability of the Portuguese economy,” Bailly said.
“These reforms are very painful; we acknowledge that,” Bailly said. “But they are necessary to give to Portugal a better future.”
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