In the latest blow to the euro zone, Fitch Ratings on Thursday downgraded Portugal, citing burgeoning debt levels and a tough financing environment.
Fitch downgraded Portugal's long-term and local currency ratings by one notch to A-plus, with a negative outlook, adding to a drumbeat of negative news on sovereign debt in Europe.
Moody's Investor Service on Tuesday said it may cut Portugal's rating by one or two notches within three months, and on Wednesday S&P lowered its outlook for Slovenia's sovereign foreign currency credit to negative.
Failure to meet its 2011 budget headline and structural deficit targets would erode confidence in the medium-term sustainability of public finances that underpins Portugal's current sovereign ratings, Fitch said.
Portugal aims to cut its budget by the equivalent of almost 4 percent of gross domestic product. But Fitch warned the target will be extremely challenging especially if, as Fitch expects, the economy falls into recession next year.
Europe's debt crisis has resulted, so far, in multibillion euro bailouts for Greece and Ireland and continues to weigh on investor confidence in the euro currency.
The euro fell against the dollar and the Swiss franc after the downgrade.
Moody's, in its warning on a possible downgrade of Portugal earlier this week, cited weak growth prospects and high borrowing costs.
At the end of November, Standard & Poor's warned it could cut Portugal's credit ratings if the country's growth prospects weaken further or if private creditors become subordinated to public creditors in a possible financial aid program.
On Slovenia, S&P on Wednesday said it was lowering its outlook due to concerns the country lacks structural measures aimed at reducing the government deficit.
(Editing by Leslie Adler)