Portugal Downgraded

Fitch Ratings has downgraded Portugal's long-term credit rating to AA- from AA.

Fitch said the outlook on Portugal's rating was negative, and cited "significant budgetary underperformance in 2009," as a key reason for the downgrade.

"A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," said Douglas Renwick, associate director in Fitch's sovereign team.

The Portugal PSI 20 traded down 1.7% and the Spanish IBEX-35 was down 1.4%, after the news.

This downgrade highlights another problem for the EU. If EU members, like Germany and France, step up to bailout Greece, will they be expected to bailout Portugal, and then Spain?

The creeking sound you hear is a very unstable EU.