Global ratings agency Moody’s has downgraded Portugal’s sovereign debt rating today, citing the country’s need to cut debt and its poor growth prospects while Portugal’s main opposition party announced it will oppose the government’s austerity plans.

Prime Minister José  Socrates has warned the country could face a bail-out. “The consequence of a political crisis would worsen the risks for our economy,” he said.

Along with the lower rating, Moody‘s gave Portugal a negative outlook, which means that more downgrades could be on the way.

The Portuguese economy grew 1.4% in 2010 driven by exports, but started contracting again in the fourth quarter. Fiscal tightening is expected to pull the economy further down in 2011.