The credit ratings agency Moody's Investors Service has downgraded Portugal's debt to junk status.

The agency said there was a growing risk the country would need a second bail-out before it was ready to borrow money from financial markets again. Portugal, Greece and the Irish Republic were all given bail-out loans to give them time to repair their economies so they could borrow money normally again.

But Greece has already had to start negotiating a second bail-out.
Moody's reduced Portugal's rating, partly because there was a chance that if there was a second bail-out, private lenders would probably have to take part in it.

The agency also said it was concerned that Portugal would not be able to achieve the deficit reduction targets set out as conditions for its first bail-out from the European Union and the International Monetary Fund.

It blamed this on, "the formidable challenges the country is facing in reducing spending, increasing tax compliance, achieving economic growth and supporting the banking system". Portugal was supposed to cut its deficit to 3% of its gross domestic product by 2013, from last year's 9.1%.