LISBON, Portugal — Portugal’s efforts to climb out of its economic crisis suffered a double setback Thursday as its credit rating was downgraded to junk status and a major strike gave voice to broad public outrage over austerity measures that have squeezed living standards.
Portugal’s deepening plight underlined Europe’s difficulties in finding a way out of the continent’s government debt crisis, which has recently shown alarming signs of spreading to bigger nations, most notably Italy.
Like others in the 17-country eurozone, Portugal has embarked on a big austerity program to make its debts sustainable. Earlier this year, Portugal followed Greece and Ireland in taking a bailout to avert bankruptcy.
As in Greece, though, the government’s tough medicine, which is required by international creditors in return for the 78 billion euro, or $104 billion, in bailout money, is unpopular. The strike had a huge turnout, making it possibly the biggest walkout in more than 20 years.
Police detained three protesters who scuffled with officers outside parliament after a protest march, Associated Press Television News reported.
“They are trying to destroy the national health service, and salaries haven’t gone up since 2004,” striking Dr. Pilar Vicen te told APTN.
International ratings agency Fitch blamed Portugal’s “large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook” for its decision to cut the country’s rating by one notch to BB+. Rival Moody’s already rates Portuguese bonds as junk, but Standard & Poor’s rates them one notch above.
Fitch’s decision to cut Portugal to a noninvestment grade likely will mean it’s even more difficult for the country, already mired in a deep recession and witnessing rising levels of unemployment, to return to bond markets by its 2013 goal. That raises the unappetizing prospect that Portugal, like Greece, might need a second bailout.
