Standard & Poor's put Portugal under warning of a possible credit-rating downgrade yesterday while the country's international lenders were in Lisbon discussing its bailout.

Portugal's government is lobbying the EU and IMF for more lenient bailout terms.

S&P said further constitutional court challenges to measures intended to cut spending and Portugal's weak economy prompted it to put the country's BB sovereign foreign currency credit rating on its credit watch negative list.

This means it will make a final decision within about 90 days.

"The credit watch placement reflects our view that there are rising risks to Portugal's ambitious fiscal consolidation objectives and an increased likelihood of noncompliance with the current EU/IMF programme," the firm said in a statement.

"Risks include further challenges to fiscal and reform measures by Portugal's Constitutional Court, weaker than expected economic performance, and a resurgence of political tension leading to delays in 2014 budget or programme reviews," it added.

In August, Portugal's Constitutional Court dealt a blow to government efforts to cut spending and keep the bailout on track, rejecting a bill that would have effectively allowed the state to fire public sector workers.

Economists fear that other measures to make Portugal's state finances more sustainable may still be challenged in court and compromise the goal of €4.7 billion in spending cuts over the next few years set by the European Union and International Monetary Fund.

Earlier yesterday, yields jumped at a T-bill auction as investors became more doubtful about Portugal's ability to emerge from its bailout smoothly and return to normal market financing.

Moody's Investors Service rates Portugal one notch lower at Ba3 with a negative outlook, while Fitch Ratings has Portugal one notch higher than S&P at BB-plus with a negative outlook.

S&P said there was a one-in-two chance that it could lower Portugal's ratings in the next few months "if fiscal performance falls short, if reform plans falter, if official support waivers, or if increased political tensions lead to delays in 2014 budget or programme reviews".