Fitch rating agency has downgraded Portugal's credit worthiness amid political uncertainty and growing expectations the debt-heavy country will need a bailout.
Fitch said Thursday it cut Portugal's sovereign credit rating to A- from A+ because of the government's resignation a day earlier following Parliament's rejection of new debt-reduction measures.
The move is likely to worsen Portugal's financial plight as markets back away from investing in the country.
Portugal's borrowing costs have surged to barely sustainable levels, increasing the likelihood it will have to ask for a rescue like Greece and Ireland did last year.
Analysts estimate a bailout would amount to euro80 billion ($113 billion).
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
LISBON, Portugal (AP) — Portugal's financial collapse appeared inevitable on Thursday, as markets took the government's resignation as proof the debt-heavy country will lose its year-long battle to avoid a bailout.
Investors pushed the interest rate on Portugal's 10-year bonds to a euro-era record of 7.71 percent — an unsustainable financial burden that could soon force the country to ask for a rescue like Greece and Ireland did last year. Analysts estimate a bailout would amount to euro80 billion ($113.02 billion).
The Socialist government quit late Wednesday after opposition parties rejected its latest debt-reduction plan, generating new market jitters and likely shortening the time the country can hold out before asking for help.
Portugal's outgoing minister for the Cabinet, Pedro Silva Pereira, said the Socialist Party will continue to resist a rescue that would frighten away investors and could delay recovery for years.
But Juergen Michels, an economist at Citigroup in London, said a bailout for Portugal is firmly on the cards.
The government's resi
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