Just after it was downgraded by the Moody’s rating agency, Portugal’s government has blamed the opposition for the fact that it had to offer a higher rate of interest at its latest debt auction to get investors to buy.
Opposition Social Democrat politicians are refusing to back the government’s new austerity plans.
As Portugal’s financing situation worsened, the government said the political standoff may force it to seek an EU bailout.
“Failure to approve the new measures in the budget plan would push the country to external help,” Finance Minister Fernando Teixeira dos Santos told parliament’s budget committee on Wednesday. “Current market conditions are unsustainable in the medium- and long-term,” he added.
Moody’s cut Portugal’s sovereign debt rating by two notches to A3 on Tuesday and said it might have to downgrade again given the impact of high borrowing costs and the difficulty of meeting tough fiscal targets.
A poll of 45 economists at European banks and research companies carried out by Reuters found a 60 percent chance that Portugal will need a bailout like Greece and Ireland, with the expectation that it will happen by June.