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Fitch will re-evaluate Portuguese debt before year’s end

Fitch ratings agency said Thursday it would wait until the end of the year before re-evaluating the long-term debt of Portugal, considered one of the weaker links in the eurozone debt chain.

Their assessment would take into account the results of the budget reforms and sale of state assets agreed in May as part of the 78-billion-euro ($112-billion) debt rescue plan it agreed with the EU and IMF, Fitch said.

But the review would also take account of the improved lending terms from the European Financial Stability Facility announced at last week’s eurozone summit, it added.

In April, Fitch Ratings slashed Portugal’s credit rating by three notches to BBB-, judging that it was less likely to win outside support given the country was heading for an election.

Despite having cleared that obstacle, the agency made it clear that the pressure was still on Portugal in a report on the country it published Thursday.

“The country’s ratings remain under downward pressure given its fragile public and external debt dynamics, uncertain long-term growth prospects and adverse macroeconomic headwinds in 2011-12,” it said.

“Portugal will suffer two years of real GDP contraction (2.0 percent in both 2011 and 2012 according to Fitch’s forecast) as its economic imbalances unwind.”