Moody's downgrades Portugal's Madeira Islands

September 23, 2011 - 6:50 AM

LISBON, Portugal (AP) — Moody's ratings agency has downgraded Portugal's Madeira Islands after its regional government failed to report more than euro1 billion ($1.35 billion) in debts.

Moody's Investors Service said Friday the two-notch cut to B3 from B1 was due to "the region's poor governance and management as well as its weak budget execution."

Last week's revelation of Madeira's hidden debts added to the pressure on Portugal, which needed a euro78 billion ($105 billion) bailout earlier this year to spare it from bankruptcy.

The regional government's president, Alberto Joao Jardim, said Thursday that Madeira's total debts are around euro5 billion ($6.7 billion). He has ruled the island since 1978 and is seeking re-election next month.

The central government in Lisbon is drawing up a rescue package for Madeira.