Standard and Poor's cut Portugal's credit rating by two notches to BBB after the rejection of austerity budget yesterday and resignation of Prime Minister Socrates yesterday, which is expected to affect confidence and result in political instability as well as increase the possibility of accepting a bailout, especially after the approval of new measures by EU leaders yesterday.

S&P said it may lower the rating by another notch next week in addition to other possible cuts over the coming three to six months, but this will depend on the form of the bailout provided to the debt-strapped nations.

It also, expects the new government to agree on the austerity measures.