Portugal and Greece Downgraded - Again: Losing Count Of How Many Times

We have lost count how many times they have been downgraded by the ratings agencies.

Standard & Poor’s has done it again today saying that the European Union’s new bailout rules means both nations may eventually renege on their debt obligations.

Of course they will.

S&P cut Portugal for the second time in a week, to BBB-, which is actually three steps below Ireland (!) . Greece was cut to BB-.

New rules on bailout loans mean (1) sovereign-debt restructuring is a “potential pre-condition to borrowing” from the future European Stability Mechanism and (2) senior unsecured government debt will be subordinated to ESM loans. Both factors are “detrimental to commercial creditors,” the rating company said.

S&P added that  although Portugal could obtain emergency loans without restructuring, the priority given to ESM loans “reduces the prospect of timely payment to government bondholders and likely also results in lower recovery values,”.

“Given Portugal’s weakened capital market access and its likely considerable external financing needs in the next few years, it is our view that Portugal will likely access” Europe’s current and future rescue funds".