Moody’s is warning it may downgrade debt-ridden Portugal’s A1 rating by one or two levels.
It is currently undertaking a review that will last up to three months.
Moody’s said it will look at Portugal’s weak growth prospects and high borrowing costs.
The ratings agency said if the Portuguese government sought an international bailout, it would have a short-term positive impact on uncertainties.
But a bailout would raise concerns about medium-term access to private market funding
Portugal has moved into the eye of the storm in Europe’s debt crisis, with markets worried it will be next to take a bailout after Ireland and Greece, although Moody’s said its solvency was not in question.
The cost of insuring Portuguese sovereign debt against default rose in response and the euro slipped slightly.