Brazil's former president Luiz Inacio Lula da Silva has some advice for Portuguese politicians: Don't take the bailout.
But even as the popular Brazilian supported Portuguese efforts to stick to their own plan for clearing the country's crippling debts, financial pressures mounted Tuesday as Standard & Poor's downgraded its credit rating of Portugal's bonds to just one notch above junk status.
That cut _ the rating agency's second in six days _ will make it even harder for Portugal, one of the 17-nation eurozone's smallest and weakest economies, to raise money on international markets, where nervous investors view the country as a very risky bet.
Standard & Poor's said it lowered its sovereign credit ratings on Portugal to BBB-/A-3 from BBB/A-2 and said Portugal's high debt load and poor growth prospects make it likely the ailing country will need a financial rescue.
Analysts estimate Portugal would need a bailout of up to euro80 billion ($113 billion).
Portugal has so far defied calls from other European countries to accept help, even as its financial woes have deepened following last week's resignation of the government. Portugal's plight could further unsettle investors worried about the eurozone's overall financial health.
The yield on Portugal's 10-year bond rose again Tuesday, hitting a new euro-era record of 8 percent as markets fretted over its ability to settle its debts and demanded high returns on Portuguese loans.
But Silva said even though Portugal is on the verge of financial collapse it should refuse assistance from the European bailout fund and the International Monetary Fund because that would only increase austerity measures and reduce growth. Portugal has already enacted pay cuts and tax hikes that have triggered a wave of strikes, including a Lisbon subway strike Tuesday, and lowered living standards.
"The IMF won't resolve Portugal's problem, like it didn't solve Brazil's," Silva said during a trip to Portugal. "Whenever the IMF tried to take care of countries' debts, it created more problems than solutions."
Silva didn't elaborate, but in the past he has criticized the IMF for espousing "orthodox and recessive concepts."
Brazil took a $41.5 billion IMF loan in 1998. Like many emerging markets, the Latin American country has enjoyed an economic boom in recent years. Silva, who left office in January, is credited with generating wealth through a blend of fiscal discipline and innovative investment strategies designed to reduce poverty.
Portugal's outgoing Prime Minister Jose Socrates insisted again that his government "is determined not to ask" for a bailout.
"I'm sick of saying we won't," he told reporters.
Socrates, who quit last week after opposition parties rejected his latest debt-cutting strategy, blamed his political rivals for Portugal's sharply deteriorating financial situation. Socrates' plan had won the backing of the European Central Bank and the European Commission before it was defeated in Parliament.
Brazil's current president, Dilma Roussef, said Tuesday her country could come to the aid of Portugal, which has expanded its Brazilian investments in recent years.
"Brazil could help Portugal like Portugal has helped Brazil," Roussef was quoted as saying by the Portuguese news agency Lusa as she began a two-day visit to Portugal.
Portugal's problems are getting worse by the day. Standard & Poor's said "an uncertain outlook for the (Portuguese) economy and the financial sector" spelled further difficulties.
The Bank of Portugal concurred, saying Tuesday that even darker times lie ahead. It forecast the economy will contract 1.4 percent this year in a double-dip recession that has pushed the jobless rate to a record 11.2 percent. The central bank had previously projected a contraction of 1.3 percent this year.
The bank also warned that its calculations didn't include additional austerity measures that will be required to meet the country's debt-reduction goals this year.
Fitch, another rating agency, downgraded Portugal last week, but Moody's said it had no immediate plans for a cut because both main parties have said they are committed to fiscal retrenchement.
Yet it was not clear who in Portugal would even have the authority to request a bailout. The outgoing minority government will likely take a caretaker role with limited powers while the country prepares for elections in late May or early June.
All political parties have rejected a bailout, though they differ on how to lower the national debt.
Portugal is in a race against time. It faces a euro4.5 billion ($6.3 billion) repayment of an existing bond in April, which officials say they can meet, and then has to find euro4.96 billion ($7 billion) for another repayment in June. It is not clear where the June funds will come from.
Alan Clendenning in Madrid contributed to this report.