Fitch still has negative outlook on Portugal

LONDON (Reuters) - Fitch Ratings agency said on Tuesday it has no plans to change its negative outlook on Portugal's double-A credit rating and was studying the details of the country's new austerity measures announced on Monday.

"Frankly we're still looking at the details and need a bit more time examining the plan," Brian Coulton, Fitch's head of Europe, Middle East and Africa sovereigns ratings told Reuters at the sidelines of a Fitch conference in London.

"The broad headline numbers are more or less in line with what we previously expected. But frankly it's too early ... we're still looking at the numbers."

Asked if Fitch has any plan to change its negative outlook on Portugal just yet, Coulton said: "No ... we still have a negative outlook on Portugal."

Generally, a negative outlook means there is a greater than even chance for a ratings downgrade over an 18-month to two-year horizon.

Fitch analyst Paul Rawkins told the conference Portugal's gradual approach to fiscal consolidation was a concern.

"(Portugal's) pedestrian approach is a concern for us, certainly in the context of weak economic growth," he said.

Portugal on Monday unveiled plans to cut its deficit to 2.8 percent of gross domestic product in 2013, from an 8.3 percent target this year, by trimming spending on civil servants and public investment and raising taxes on high incomes and stock market gains.

The draft plan, yet to be submitted to Brussels, is part of a strategy to convince markets the country will tackle rising deficits and debt and avoid Greek-style fiscal problems.

The premium investors demand to buy 10-year Portuguese and other peripheral euro zone government bonds rather than German benchmarks rose following Fitch comments and on profit-taking.

The 10-year Portuguese/German government bond yield spread widened by 7 basis points on Tuesday to 119 bps. The equivalent Greek/German spread widened by 14 bps to 302 bps.

GREECE, UK OUTLOOK

Fitch analyst Chris Pryce said Greece's triple-B plus rating, with a negative outlook, did not factor in a bailout and warned there were still questions over whether Greece can implement its fiscal austerity measures over the longer term.

"Assuming at this stage the government does meet its (fiscal) target for this year, we have to remember that the first year was always going to be fiscally the easiest year of the three or four years of the consolidation programme," he told the conference.

"Next year, they have to cough up another 3 percent or so of GDP in cuts and the following year similarly. There is a great question mark over the political will and the ability of the Papandreou government to perform."

On Britain, Coulton said while the country's credit profile had deteriorated, it was still within tolerance of a triple-A rating. Fitch has a stable outlook on the top rating.

But he said the UK needed stronger fiscal measures, adding the rating agency was "uncomfortable with the fiscal adjustment path set out by UK authorities."

Sterling tumbled to a one-week low below $1.50 on a battery of weak economic data and as credit ratings firms warned on Britain's sovereign rating and those of its commercial banks.

(Editing by Susan Fenton)