Standard & Poor’s put Portugal under warning of a possible credit-rating downgrade while the country’s international lenders were in Lisbon discussing its bailout.
Portugal’s government is lobbying the EU and IMF for more lenient bailout terms.
S&P said further constitutional court challenges to measures intended to cut spending and Portugal’s weak economy prompted it to put the country’s BB sovereign foreign currency credit rating on its CreditWatch negative list, meaning it will make a final decision within about 90 days.
“The CreditWatch placement reflects our view that there are rising risks to Portugal’s ambitious fiscal consolidation objectives and an increased likelihood of noncompliance with the current EU/IMF program,” the firm said in a statement.
“Risks include further challenges to fiscal and reform measures by Portugal’s Constitutional Court, weaker-than-expected economic performance, and a resurgence of political tension leading to delays next year budget or program reviews,” S&P said.
In August, Portugal’s Constitutional Court dealt a blow to government efforts to cut spending and keep the bailout on track, rejecting a bill that would have effectively allowed the state to fire public sector workers.