|The Portuguese economy has been crippled by debt, low growth rates and high unemployment [GALLO/GETTY]
Jose Socrates, the caretaker Portuguese prime minister, has announced that his debt-laden country has sent a request for financial aid to the European Commission.
Speaking in a televised address to the nation on Wednesday, Socrates termed the move "inevitable".
"I tried everying, but in conscience we have reached a moment when not taking this decision would imply risks that the country should not take," he said.
Earlier on Wednesday, Fernando Teixeira dos Santos, the finance minister, said that Portugal would need to resort to European Union mechanisms in order to avoid defaulting on its debt.
Olli Rehn, the European Commissioner for Economic and Monetary Affairs, termed the decision by the Portuguese government to seek the bailout "a responsible move", adding that the amount of aid is to be determined shortly.
Eurozone officials say Lisbon will likely request between $86bn (60bn euros) and $114.7bn (80bn euros) in EU and International Monetary Fund loans over three years, but that any assistance will be subject to strict conditions.
Manuel Barroso, the EU commission president, said in a statement that Portugal's request for aid would be "processed in the swiftest possible manner, according to the rules applicable".
The International Monetary Fund said late on Wednesday that it stood ready to offer Portugal assistance if need be, but that no request had been made yet.
Teixeira dos Santos, the Portuguese finance minister, said the country had been "pushed in an irresponsible manner" into asking for foreign funds.
"I believe it is necessary to have recourse to the financing mechanisms which are available within the European context," he said in written replies to questions submitted by the business daily Jornal de Negocios.
"The country has been pushed, in an irresponsible manner, into a difficult situation on the financial markets," the minister said.
He appeared to be referring to the fall of the Portuguese government last month on the back of parliamentary rejection of an austerity package.
"Faced with this difficult situation, which could have been avoided, I believe it is necessary to have recourse to the financing mechanisms available with Europe, adapted to the current political situation," he said.
"Such an approach wold also require the involvement of the main political groups and political institutions," he added in comments posted on the newspaper's website.
With markets piling pressure on the debt-laden economy, demanding ever higher rates of return to invest in new government debt instruments, there has been been mounting speculation that Portugal would have to resort to external help to resolve its debt issues.
With the decision to seek the EU's help, Portugal becomes the third financially troubled eurozone country, after Greece and Ireland, to accept assistance from Europe's bailout fund and the International Monetary Fund.
Significantly, Germany, the eurozone's paymaster, said earlier on Wednesday that Portugal could only approach the European Financial Stability Fund (EFSF), ruling out any possibility of a bridging loan being provided to tide the country over until elections in June.
"We created this instrument the EFSF, precisely for this case, for cases like this," a German finance ministry spokesman said. "Portugal, as a member of the eurozone, is entitled to use this instrument."
"It is Portugal's sovereign decision to make if it taps this instrument, if it wishes. I think, against the background, that there is no point in wondering what the alternatives are if this instrument, which was specially created for this purpose, has not been considered."
Elena Salgado, Spain's economy minister, said on Wednesday that EU funding would be available for Portugal if it asked for it, but she ruled out the possibility of Spain offering its neighbour a bilateral loan at this time.
Portuguese reports said that banks wanted outgoing premier Jose Socrates' caretaker government to ask the EU executive for a "bridging loan" of $21.4bn (15 bn euros) ahead of the June 5 elections.
Earlier on Wednesday, Portugal managed to raise $1.4bn in a Treasury bill sale, but paid a higher rate for the cash as investors deemed risk to be high.
The government debt agency sold $803.37m in T-bills that mature in October, and $645.57m in bills maturing in March next year.
Investors demanded high interest rates - 5.11 and 5.9 per cent respectively - to part with their money.
In similar auctions last month, Portugal paid rates of just under three per cent for six-month bills and 4.3 per cent on 12-month bills.
"Portugal has once again managed to sell its debt but the rates are prohibitive," said Filipe Silva, a strategist at the Banco Carregosa.
Portugal must repay some $6bn (4.2 bn euros) of debt by April 15 and another $7bn (4.9bn euros) by June 15.
"While we believe that the country has sufficient funds available for next Friday's redemption, we doubt that it is capable - at the moment - of meeting the June obligation," analysts at Lloyds Bank Corporate Markets told Dow Jones Newswires.
The figures show how market confidence in Portugal's financial future is evaporating.
The yield on the 10-year bond, for example, rose to a new euro-era record of 8.78 per cent on Wednesday.
On Tuesday, the Moody's Investors Service downgraded Portugal's sovereign debt ratings by one notch, from A3 to Baa1, warning that it expected the country to seek external financial help.