S&P May Downgrade Portugal's Credit Rating

Standard & Poor's warned Tuesday that it may downgrade Portugal's credit rating once again. The government has been ineffective at creating policies that will boost productivity and help cut the country's deficit, S&P said in a report.

S&P, which already lowered Portugal's credit rating in April, also put a "negative implications" label on Portugal's long-term and short-term currency sovereign ratings.

The ratings service forecast that Portugal's economy will shrink by at least 2% next year because lack of flexibility within the country's labor force and economic policies that make it unable to respond effectively to global economic changes. The 2011 government budget cuts will more than offset any potential economic growth next year, S&P says.