Portugal's downgrade is deserved, but unlikely to cause lasting damage to the euro, portfolio manager Axel Merk tells CNN Money
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'The downgrade is a deserved slap on the wrist to Portugal. It's an appropriate response by Fitch. But I don't think Portugal is in as bad shape as Greece, and neither are Spain or Ireland. I don't subscribe to the contagion theory,' said Axel Merk, president of Merk Mutual Funds, a Palo Alto, California based money manager specializing in currency investments.
Merk also pointed out that Fitch merely downgraded Portugal's credit rating to AA- from AA. Greece, by way of comparison, has a far lower credit rating of BBB+ from Fitch.
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Still, Merk argued that nobody should be surprised by the fiscal problems facing Europe. He said it's a universal problem. So in some respects, the focus on ratings cuts may be somewhat meaningless if everybody's in the same boat. Perhaps nobody deserves a perfect triple-A rating.
'Sovereign debt is a global problem. Every country in the world, including the U.S., has the same challenges and we all have to learn how to deal with it,' Merk said. ..."