Added to that, the government quit last month after opposition parties rejected its austerity measures, and the country is in a political limbo until a June election, making it uncertain who might ask for help.
Investors, including the country's main banks, are balking at providing funds to Portugal out of fear it may not be able to settle its debts. As financing dries up, companies could have problems finding money to pay wages. The unemployment rate last year reached a record 11.2 percent.
Portugal's bankers had urged the caretaker government to ask at least for a bridge loan of at least â¿¬10 billion ($14.3 billion) to see it through the election.
The president of the Portuguese Association of Banks, Antonio de Sousa, said substantial financial support is "urgent.""The banks have no more credit left to give," he was quoted as saying Wednesday by national news agency Lusa. Portugal managed to raise about â¿¬1 billion ($1.4 billion) in a Treasury bill sale Wednesday but paid an unsustainably high interest rate to get the cash. The government debt agency sold â¿¬560 million in T-bills that mature in October and â¿¬450 million in bills maturing in March next year. But investors asked for high interest rates â¿¿ 5.11 percent and 5.9 percent â¿¿ to part with their money. In similar auctions last month, Portugal paid a rate of just under 3 percent on 6-month bills and 4.3 percent on 12-month bills. "Portugal was able to issue debt once more, but the rates are prohibitive," Filipe Silva, debt manager at Banco Caregosa, said. "The big question ... is where the buyers will come from for future sales."