The Portuguese caretaker government has admitted it needs financial help from the European Union, after months of resisting assistance.
The abrupt U-turn has been welcomed by the European Commission as a responsible move.
Portugal now becomes the third eurozone country to seek aid, after Ireland and Greece.
Speaking on television tonight, Portugal's Prime Minister Jose Socrates said seeking financial assistance was a decision of last resort, adding: ‘This is an especially grave moment for our country ... and things will only get worse if nothing's done.’
EU Economic and Monetary Affairs Commissioner Olli Rehn said the request was ‘a responsible move for the sake of economic stability in the country and in Europe.’
EU Commission President Jose Manuel Barroso, himself Portuguese, said the request would be ‘processed in the swiftest possible manner’.
What is still unclear is precisely what type of aid Portugal will seek.
It was not immediately clear from the finance minister's comment whether Portugal will request to a short-term loan to secure financing until a 5 June snap general election or a fully-fledged bailout.
EU sources estimate a full bailout would be in the region of €80bn.
Portugal's cost of credit has leapt since the minority Socialist government quit last month after a parliamentary defeat on tougher austerity measures, casting the country into political limbo.
Earlier, the country issued €1bn in treasury bills.
The finance ministry said the auction was a confirmation of the deterioration caused by the rejection of the austerity measures.
The government has held out hope previously that by steadily meeting budget goals and cutting spending it could regain investor confidence and avoid a bailout.
In the latest threat to the government's resistance to seeking foreign financing, local banks warned the government on Monday that it must seek a short-term emergency loan to soothe market concerns ahead of the election, saying that under current conditions they cannot continue buying government debt.
'There has been a very important signal from the banks for the future,' said BNP Paribas analyst Ioannis Sokos.
'Portugal can still make it through April, but probably won't get to June without a bailout.'
Portugal will now head discussions on Thursday in Budapest when EU finance ministers meet, and in Frankfurt when the European Central Bank is expected to announce an interest rate hike.
