Moody's Investor Services downgraded Portugal's credit rating for the second time in less than one month on Tuesday. It is the latest in a series of cuts by major rating agencies.
Moody's said Portugal faces increased political, budgetary, and economic uncertainty.
Portugal has scheduled an election on June 5, and Moody's said the next government will probably have to urgently seek loans from fellow members of the European Union.
News reports say Portugal may also seek a short-term loan to meet needs until the next government can take over. Prime Minister Jose Socrates resigned in late March when parliament refused to adopt an austerity program.
Rating agencies have expressed skepticism that Portugal will be able to complete an ambitious deficit-cutting program. The large deficit makes lenders skeptical they will be repaid, and prompts them to demand higher interest rates in exchange for taking on greater risk associated with Portugal's bonds.
Some information for this report was provided by AP, AFP and Reuters.