Greece was pushed to the brink of a financial abyss and started dragging another eurozone country – Portugal – down with it Tuesday, fueling fears of a continent-wide debt meltdown.

Stocks around the world tanked when ratings agency Standard & Poor’s downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece’s financial contagion is spreading.

Greece was pushed to the brink of a financial abyss and started dragging another eurozone country – Portugal – down with it Tuesday, fueling fears of a continent-wide debt meltdown.

 

Stocks around the world tanked when ratings agency Standard & Poor’s downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece’s financial contagion is spreading.

 

Greece is struggling with massive debt, and with prospects for economic growth weak it could end up in default. Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a euro45 billion rescue package, but it hasn’t worked.

 

Standard & Poor’s warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece’s debt crisis is mushrooming to other debt-laden members of the eurozone.

 

One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral – including Europe’s fifth-largest, Spain.

 

The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.

Many investors think Greece will have enough money to avoid default in the coming weeks, but the future is cloudier.

 

Junk status sinks Greece’s hopes even deeper. German Chancellor Angela Merkel reiterated her position that Greece should first conclude the current negotiations with the IMF and the European Union about austerity measures for the coming years before receiving the international loan package.

 Speaking at an election rally Tuesday afternoon, Merkel said it is appropriate to tell Greeks, “You have to economize, you have to become fair, you have to be honest; if not, nobody can help you,” according to the German news agency DAPD.

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