Germany's deputy finance minister has said talk of a second EU/IMF bailout for Portugal is premature and that his Government is confident that Lisbon could get back on track.
Joerg Asmussen said Portugal's new Government needed time.
'It is absolutely premature to talk about a second programme for Portugal. The programme has just started,' Mr Asmussen said in an interview with Reuters Insider TV.
'There is a new government in place so I would really suggest giving the government the time to do what the new government has also promised.
'We are confident they are willing and able to implement the first package to get back on track,' he said.
Earlier, ratings agency Moody's cut Portugal's credit rating to junk and warned that it may need a second bailout.
Moody's made the downgrade despite admitting Lisbon was meeting its deficit reduction targets.
European Commission President Josè Manuel Barroso attacked the downgrading of Portugal as speculative, while in Brussels an EU spokesman said it was questionable, unfortunate and inappropriate.
Some critics however, say that the European Central Bank absolutely relies on the ratings agencies to manage their policies.
Others say the EU cannot criticise the agencies for being inflexible now, when it criticised that very flexibility during the Lehman Brothers crisis.
On Monday, Standard and Poors said it would consider a selective default, a plan by French banks to rollover their Greek debt for a period of 30 years.
Bloomberg is also quoting analysts suggesting that Ireland could be next to face a credit rating downgrade to 'junk' status.
