Standard & Poor’s has raised concerns about the treatment of private creditors under the eurozone's proposed European Stability Mechanism this week, putting Portugal on negative watch on the possibility it will need to seek emergency support from the ESM. Analysts in Europe said they remained concerned further possible downgrades would follow as investors grew nervous over the new development.

European finance ministers released a statement last weekend saying the mechanism, which essentially seeks to safeguard the stability of the euro area, would be set up by 2013 to provide support to troubled eurozone sovereigns. In contrast to the existing European Financial Stability Facility, whose loans are pari passu with private creditor loans, the ESM's loans "will enjoy preferred creditor status, junior only to the IMF loan" according to the Eurogroup.