Portugal and Greece get downgrade warning from S&P (AP) (02-03-2011)

LONDON (AP) -- Leading credit rating agency Standard & Poor's has issued a warning about further downgrading both Portugal and Greece's debt in the coming two months, depending on the outcome of a crucial European leaders' summit later this month.

It is currently maintaining its A- rating on Portugal and its BB+ rating on Greece but has kept both countries on so-called "CreditWatch with negative implications."

S&P said it could lower the ratings on both countries within the next two months after analyzing an expected new European bailout mechanism. EU policymakers are set to decide later this month on the key features of the European Stability Mechanism, which is due to replace the current European Financial Stability Facility from 2013.

It said it was unlikely that either rating would be cut by more than two notches. Even if Portugal was downgraded two notches it would still be investment grade, while Greece's debt is junk status already.

Source: AP