BRUSSELS — Portugal’s credit rating was cut two notches Tuesday by Moody’s Investors’ Service, lending urgency to the discussions of European Union finance ministers about how banks would be affected if a government were to default on its debts.
Moody’s said it was cutting Portugal’s sovereign bond ratings to to A1 — still investment grade — from Aa2. The ratings agency noted that the national debt had risen sharply relative to gross domestic product as a result of spending on economic stimulus measures, and it warned that weak growth would weigh on government finances for two or three more years.
Meanwhile, officials in Brussels were discussing for a second day how much information to release from bank stress tests when data are made public July 23. The tests are meant to reassure investors that a 750 billion euro, or nearly $1 trillion, safety net will be enough to calm a debt crisis in Europe. But the results could also force banks to seek additional financing to increase the cushion against potential losses.
“The European banking sector is, over all, resilient,” Olli Rehn, the European commissioner for economic and monetary affairs, said at a news conference Monday night. “At the same time when we publish the stress tests we will have to prepare for any pockets of vulnerability.”
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