S&P downgrades Greece, Portugal

Standard & Poors downgraded credit ratings for Greece and Portugal on Tuesday, pushing Greece deeper into junk status and Portugal to a notch above.

S&P downgraded Greece to BB- from BB+. The agency said the country's borrowing needs are such that it will likely need more help on top of the euro110 billion ($155 billion) loans it is receiving from the International Monetary Fund and fellow eurozone countries.

Portugal's credit rating slipped by one notch to just above junk status, its second downgrade in less than a week as the debt-ridden country grapples with a political crisis.

S&P cited the prospects of unsecured government debt being subordinated to future loans from the European Stability Mechanism fund, which it said Portugal was likely to resort to.

"Given Portugal's weakened capital market access and its likely considerable external financing needs in the next few years, it is our view that Portugal will likely access the EFSF (the current euro rescue fund) and thereafter the ESM," the agency said.

S&P's BBB-minus rating, the lowest investment grade, is now far below Moody's A3 and Fitch Ratings' A-minus.

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Greece was rescued from the brink of default last year by the three-year bailout package. In return, it has been overhauling its economy and implementing strict austerity measures, including public sector salary cuts and increased taxes.

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But it remains essentially blocked out of the long-term debt market by prohibitively high interest rates demanded for its bonds, and the country has been struggling to meet revenue targets.

"Given Greece's persistently significant borrowing needs, we believe that it is highly likely that Greece will access" bailout funds available for eurozone countries, S&P said.