UPDATE 2-Moody’s cuts Portugal, says bailout needed urgently

(Adds comparison with other agencies, EU talks)

LISBON, April 5 (Reuters) – Credit rating agency Moody’s cut
Portugal’s sovereign debt by one notch on Tuesday, saying it
believed an incoming government would need to seek financing
support from the European Union as a matter of urgency.

The cut in Portugal’s long-term rating to Baa1 from A3 still
leaves Moody’s evaluation of its debt two notches higher than
fellow agency Standard and Poor’s but a notch below that of
Fitch Ratings.

Moody’s said the debt was still under negative review, with
further downgrades dependent on Lisbon’s ability to secure
medium-term funding.

“The limited migration of the rating to Baa1 (and not lower)
in today’s action, reflects Moody’s assessment that assistance
would be provided by the other members of the euro zone if
Portugal needs financing on an expedited basis before it can
obtain funds from the European Financial Stability Facility
(EFSF),” Moody’s said in a statement.

“Moody’s believes the new government will likely approach
the facility as a matter of urgency.”

The euro (EUR=: Quote, Profile, Research) eased to session lows of around $1.4172
after the downgrade.

Euro zone sources said on Monday that finance ministers will
discuss Portugal’s options for resolving its debt problems under
a caretaker government, including whether it is capable of
requesting EU financial aid, at meetings on Friday.

Financial markets are convinced Lisbon will have to follow
Greece and Ireland in asking the European Union and
International Monetary Fund for a bailout, but the situation has
been complicated by the fall of the government in Lisbon.

Caretaker Prime Minister Jose Socrates, who resigned after
parliament rejected a fresh round of budget austerity, has made
it a point of honour not to accept EU/IMF help and the country
may remain in limbo until an election set for June 5.

“I am committed to the idea of defending Portugal from
external aid … I will do everything to defend Portugal from
this scenario,” Socrates told RTP television late on Monday.

While Portugal can probably go on funding itself for the
next eight weeks — it has to refinance 4.3 billion euros ($6.1
billion) of debt in April and 4.9 billion in June — the cost of
doing so is likely to go on being punitively high.
(Writing by Alex Richardson and Patrick Graham; Editing by Mike

UPDATE 2-Moody’s cuts Portugal, says bailout needed urgently