ATHENS (AP) - Europe's government debt crisis worsened ominously yesterday when Greece's credit rating was downgraded to junk status and Portugal's debt was lowered on fears the trouble could spread. Stocks slid on the news.

The Portuguese downgrade was a sign the European Union's (EU) fears of that the debt crisis would spread beyond Greece - and further undermine the euro currency - might be coming true.

For its part, Greece has already admitted it cannot pay debts coming due shortly and reached for a bailout. But the reluctance of the largest country using the euro - Germany - to fund the largest share of the euro45 billion rescue by European government and the International Monetary Fund (IMF) is sending shudders through markets.

Investors fear the money may not reach Greece to enable it to avoid default by May 19, when 8.5 billion Euros in bond payments come due.

Greek Finance Minister George Papaconstantinou said on Greek television that the country will "absolutely and without any doubt" be able to service that debt.

"Everyone now understands that there is no more time for delay," he said, adding that there was no chance Greece would restructure its debt, a concept he called "outside every negotiation".

"I am categorical on this point," Papaconstantinou said.

The minister said Athens was close to reaching an agreement with the IMF, the European Central Bank and the European Commission on details of the rescue package, and that talks could "easily" be completed by Sunday.

The FTSE 100 index of leading British shares closed down 2.6 percent, Germany's DAX slid 2.7 percent and the French CAC-40 in France ended 3.8 percent lower. On Wall Street, the Dow Jones industrial average was down 132.25 points, or 1.2 percent, at 11,072.78 around midday New York time while the broader Standard & Poor's 500 index tumbled 18.17 points, or 1.5 percent, at 1,193.34.

Greek and Portuguese share were pounded, down 6.7 percent and 5.4 percent. The interest rate gap, or spread, between Portuguese and benchmark German 10-year bonds trading on financial markets - a key indicator of market scepticism - rose 57 basis points, or more than half a percentage point, to hit 5.86 percentage points. The higher the gap, the less confidence in Portugal - and it was the widest gap since the shared euro currency, which Portugal and 15 other nations use, came into circulation.

Both governments have imposed budget cutbacks against political resistance from unions at home. Markets have been sceptical that they can push through enough cuts, given political resistance, to put their finances in order.

Greek government spokesman Giorgos Petalotis, speaking to AP after news of downgrade, said, "This shows that the problem is broader, and concerns all the other countries and not just Greece. As a country, we are doing everything necessary to overcome this difficult situation - we are taking the measures and decisions that have been asked of us for sometime now."

Asked if the downgrade news means bailout negotiations need to be speeded up, Petalotis answered, "I think the need to them speed up, is something everyone can assess."

Portugal's finance minister said the downgrade would only make things worse.

"This is a decisive moment," Finance Minister Fernando Teixeira dos Santos said in a statement, urging political parties in opposition to his minority Socialist government to help swiftly enact debt-reduction measures he has outlined in his austerity plan.

"Regardless of the opinion we have in relation to the fairness and update of the rating, the fact is that this decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence," Teixeira dos Santos said.

The spreading trouble threaten more woes for the shared euro currency, and raise the possibility of trouble spreading even further to Spain, whose economy is far larger than that of Greece or Portugal. Eurozone governments, themselves facing higher debt levels from the global recession, would be hard pressed to find enough money to bail out Spain if it comes to that.

The crisis has highlighted the inability of the rules set up to support the euro to keep governments from undermining the currency by running up big debts. Those rules limited deficits to three percent of grosse domestic product but have been widely flouted, and EU officials are talking about ways to strengthen them.

Nicholas Skourias, chief investment officer at Pegasus Securities, said that markets were already pricing in a Greek default or restructuring, while rising spreads on Portuguese bonds showed that "the more important and main risk is the contagion effect. And I think that the Germans do not realise this risk".

Germany wants to see a commitment to deep, long-term cutbacks in Greek government services and benefits before it agrees to provide its 8.4 billion Euros of the bailout cash. But investors remain highly sceptical that Greek voters used to generous benefits and worker protections will accept a drop in living standards.