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Tuesday, July 13, 2010

Moody's Cuts Rating for Portugal

The debt crisis in Europe continues to worsen. Now, Moody's has cut the ratings on debt held by the Portuguese.

Moody's credit rating agency downgraded Portugal's debt on Tuesday, casting fresh doubt on the country's ability to weather its debt crisis as the economy weakens.

Moody's Investors Service cut Portugal's government bond ratings to A1 from Aa2. The move deepens the country's financial woes because foreign lenders will likely demand higher interest returns for the risk of loaning it money.

Portugal's financial ordeal is part of a government debt crisis that has engulfed the euro zone and weighed on the shared currency. The cuts in Portugal's rating by international agencies in recent months have stoked market concerns that the crisis, which led Greece to the brink of bankruptcy and a bailout, could spread to other financially troubled countries in the euro zone.

It's only a matter of time before the US faces a similar fate. No one framed the issue better than Erskine Bowles.

"This debt is like a cancer," Bowles said in a sober presentation nonetheless lightened by humorous asides between him and Simpson. "It is truly going to destroy the country from within."

That's where we are at and the President simply isn't willing to acknowledge it yet. He continues to claim that he inherited this deficit and that he has worked to reduce it. Markets don't respond to nonsensical rhetoric and ignoring reality won't solve it. That seems to be the only thing that Obama is doing so far.


AG said...

If the President isn't willing to acknowledge it yet, then why was *he* the one who appointed this "deficit committee" over the objections of Congress, and then stacked it with people like Erksine Bowles and Alan Simpson who are convinced the only way to balance the budget is to cut Social Security?

mike volpe said...

You're right. My language wasn't accurate. He acknowledges a debt crisis. He won't acknowledge any responsibility for making it much worse. That's what I should have said.