The Prime Minister, Jose Socrates' resignation has caused the Standard & Poor's downgrading Portugal's credit ratings. The cause for the resignation has been considered the loss of a key vote on the austerity package of the government.

It was seen that the Eurozone member's long-term sovereign credit were degraded to BBB. They were earlier considered as A-. The A-2 short-term credit rating and BBB long-term rating sustained to remain under 'CreditWatch.

As per the rating agency the main reason for the change in the rating has been the instability of the government. After the collapse of the government the investors are not confident about the change in the market.

Looking at the current situation it is expected that the credit rating will fall even further. To recover from this condition it is required that the investors feel the stability in government.

The failure to pass the austerity measures created to reinstate the country's public finances has also been the reason for the decrease in credit rating of Portugal.

S&P has also warned that credit rating can be reduced by another notch in the coming week. They also confirmed that the new government would have to work extra hard to improve the condition and might have to follow a version of these reform proposals.