Portugal had its credit rating downgraded Thursday by the Fitch Ratings agency amid mounting concerns over the country's ability to raise money in the markets to finance its hefty borrowings.

Fitch said it was reducing its rating on the country's debt by one notch to A+ from AA- and warned that further downgrades may be in the offing by maintaining its negative outlook.

“The downgrade reflects an even slower reduction in the current account deficit and a much more difficult financing environment for the Portuguese government and banks than incorporated into Fitch's previous rating (in March), as well as a deteriorating near-term economic outlook,” Fitch said in a statement.

Fitch's downgrade follows a warning earlier this week from rival Moody's Investor Services that it may cut its A1 rating on Portugal by a notch or two because of uncertain economic growth, the high cost of borrowing on global markets and worries about the banking sector.

Fitch's reasoning is very similar and is likely to stoke renewed speculation that Portugal could well be the next country using the euro in need of financial help from its partners in the European Union and the International Monetary Fund — Greece and Ireland have already suffered the ignominy of being bailed out.

The agency said the Portuguese government would likely meet its target of reducing its budget deficit to 7.3 per cent of national income this year, but voiced concerns that this is heavily dependent on one-time measures, which don't make a dent on the long-term state of the public finances.

As a result, Fitch said the government will find it “extremely challenging” getting the budget into shape, especially if, as the agency expects, the economy falls into recession next year.

The Portuguese government aims to reduce the budget deficit to 3 per cent of GDP by 2012 and to just 2 per cent of 2013, which would be extremely difficult if the euro zone's smallest economy starts to contract again — in effect, lower growth means lower tax receipts and higher social spending, hardly conducive to budgetary health.

“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.

Earlier, Fitch downgraded Hungary's debt to one notch above junk status, citing budget plans that it warned are ill-considered but that the country's lawmakers approved soon after on Thursday.

Fitch said it was concerned about the government's economic strategy even though it has pledged to get the budget deficit below 3 per cent of national income next year. The agency also said it was concerned that a heavy debt load makes the country particularly vulnerable to global economic shocks.

The euro zone's credit position took another hit on Wednesday as the outlook for Slovenia's sovereign foreign currency credit was revised to negative from stable by Standard & Poor's.

S&P cited a weakening commitment to budgetary consolidation by the government since the onset in 2008 of a rapid deterioration in public finances.

Slovenia's AA rating was affirmed, S&P said in a statement.

"We believe that this weakening is evidenced by the government's backloading of its budgetary consolidation strategy to the latter years of its medium-term plan," S&P's statement said.

S&P's rating of Slovenia is equal to the investment grade ratings of Aa2 from Moody's Investors Service and AA from Fitch Ratings.

The revision to a negative outlook means S&P has given itself a two-year time horizon to decide whether to downgrade the credit.

Slovenia joined the European Union in 2004 and adopted the euro as its currency on Jan. 1, 2007. The negative outlook on the credit is the latest piece of troubling credit news for Europe, which is reeling from a debt crisis that resulted in multibillion euro bailouts and eroding confidence in the euro currency.