Pressures mounting on Portugal’s rating, says DBRS

DBRS – the ratings agency that keeps Portugal eligible for free bank funding and support from the European Central Bank – is due to review the country’s creditworthiness on October 21. Boss Fergus McCormick has told Reuters that concerns are mounting due to Portugal’s “low-growth economy battles and banking sector strains”. A downgrade, says Reuters, could “cause havoc for Portugal’s borrowing costs” and trigger “a significant market selloff”.

The way ahead depends much on how much the government left-wing partners support its initiatives to shore-up CGD and BCP banks (this will become clearer as October approaches), and what happens in Italy’s upcoming Constitutional referendum.

The vote in Italy will be “the next big test, following the UK referendum, of popular support for the EU”, said McCormick, stressing it will “either result in greater political stability and better governance, or more uncertainty and lower growth”.