ECB suspends rules on Portuguese collateral

FRANKFURT (Reuters) - The European Central Bank has waived its rules on minimum credit ratings for accepting Portuguese debt as security for its loans to banks, President Jean-Claude Trichet said on Thursday.

"We have decided to suspend the application of the minimum credit rating threshold ... for the purpose of eurosystem credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government," Trichet told a news conference after the bank raised interest rates.

Moody's downgrading of freshly bailed-out Portugal's credit rating to "junk" earlier this week shocked financial markets and cast new doubt on European efforts to rescue distressed euro zone states without debt restructuring.

The thumbs-down, coming so soon after a new centre-right Lisbon government announced austerity plans going beyond those demanded by international lenders, again called into question the EU strategy for dealing with the euro zone debt crisis.

(Writing by Patrick Graham)