Portugal PM slams credit rating agencies

Portuguese Prime Minister José Socrates said doubts over his country's public finances were without foundation and attacked the credibility of ratings agencies in assessing risk.

"I do not understand this doubt about my country. Someone needs to explain to me how our situation is different from other countries and how it is more worrisome," the premier told Liberation daily in an interview yesterday.

"We are in line with what has happened elsewhere in the world following the crisis," Socrates added.

Portugal and Spain are seen as among the weakest eurozone members after Greece as the global economic crisis has savaged their economies and public finances, leading to large and growing public deficits.

Greece in particular has come under pressure in the markets where the cost of raising fresh funds to cover government spending has risen sharply.

Portugal's public deficit (the broad shortfall between revenues and government spending) hit 9.3 per cent of gross domestic product last year, growing at the same average rate as elsewhere in the eurozone and in the Group of 20 top developed and developing, the premier said.

"If our deficit has got worse, it is because we have tried to help our economy," he said, noting that such intervention had done the job - Portugal, like France, having been among the first to come out of recession in the second quarter last year.

Last week, credit rating agencies Moody's and Fitch piled the pressure on Portugal over its deficit, saying they were wary about the credibility of government action announced earlier to tackle the problems.

They said the government would have to take stronger measures to bring the deficit back below the EU limit of three percent of GDP.

The other top ratings agency, Standard & Poor's, downgraded Portugal earlier, saying the country faced an increasingly difficult task to improve its competitiveness and stimulate growth in difficult economic conditions alongside a high level of public debt.

Socrates told Liberation that the financial markets and ratings agencies were making snap judgements rather than looking at the real economic situation.

"I wonder why they do not show the same concern over the situation in the UK, in the US States, let alone in Japan, where the public finances are in a much worse state than in Portugal," he said.