The thumbs-down, coming so soon after a new center-right Lisbon government announced austerity plans going beyond those demanded by international lenders, again called into question the EU strategy for dealing with the euro zone sovereign debt crisis.

Moody‘s said Portugal may need a second round of rescue funds before it can return to capital markets, just as European governments and banks are haggling over a second 120 billion euro bailout for Greece, which has a much higher debt ratio.