Portugal credit downgrade reminder of Eurozone troubles
TEXT OF INTERVIEW
Steve Chiotakis: The ratings agency Moody’s downgraded the credit of Portugal today. That’s going to make it harder for the Portugese government to borrow money, and the value of the Euro has dropped on the news. Marketplace’s Stephen Beard is with us live to talk about it. Good morning, Stephen.
Stephen Beard: Hello, Steve.
Chiotakis: All right, so Portugal’s not a huge country. How big a deal is this?
Beard: Well yes, you’re right, I mean Portugal is a small economy, it’s only two-thirds the size of Greece, which is itself pretty small. But this downgrade is a reminder that the big problem overhanging global markets hasn’t gone away, and that of course is the problem of government or sovereign debt — the fear that one or more of these heavily-indebted eurozone government might default under fear that that would really rock the euro, the single currency.
Chiotakis: And we’ve been hearing, Stephen, though, that Europe’s, you know, turning the corner. I mean this seems like a surprise.
Beard: Yes, I mean you’re right, there has been some calm entering the market. But that talk about the euro turning the corner may have been a little premature, says Neil MacKinnon, who watches currency markets for VTB Capital:
Neil MacKinnon: There is a real danger of a further slide if we see more problems with European banks and more problems with eurozone sovereign debt.
And, he says, traders could get even more jittery about the euro over the next few days because the so-called bank stress tests are coming out here soon. This is something the American banks went through last year, a series of theoretical crises that banks are put through to test their health. Well the results of the European bank stress tests are due out at the end of next week.
Chiotakis: Hmmm. All right, Marketplace’s Stephen Beard reporting from London this morning. Stephen, thanks.
Beard: OK, Steve.
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