By Jan Strupczewski
BRUSSELS, Sept 29 (Reuters) - Euro zone finance ministers will press Portugal on Thursday to take further radical steps to ease market concerns over its debt in its politically-difficult 2011 budget, euro zone sources said on Wednesday.
The sharp rise in the relative cost of funding Portugal's debt burden on markets in recent weeks shows measures so far have not convinced markets and point to continuing worries over its banking sector, one source involved in the preparation of the meeting said.
A grilling in Brussels over the 2011 budget plans, on which the main opposition party in Lisbon is refusing to play ball, will see EU finance ministers stress the need for fiscal consolidation, but also for structural reforms, the sources said.
"They are preparing the 2011 budget and they will get very tough recommendations on what should be in their budget and that the budget should not only have a fiscal component but that it also should have a structural component," one source said.
Portugal's centre-right opposition refused on Wednesday to commit to backing the 2011 budget but said it was open to talks if the minority Socialist government agreed to cut spending rather than raise taxes.
President Anibal Cavaco Silva met with political leaders to broker a deal on the 2011 budget impasse but failed to win an immediate breakthrough or soothe investor concerns over Portugal's ability to cut its budget gap.
"The idea will be to put pressure on the Portuguese to do more immediately, it is related to the current developments," a second euro zone source said.
"The ministers will use the discussion to put pressure on Portugal because there is a need for further measures in Portugal, obviously, and quite radical ones," the source said.
"Whatever the ministers think, the markets do not seem to think that the measures so far are enough, the latest Portuguese bond issuance has not been a huge success and there is trouble in the banking sector," the second source said.
Investors have dumped Portuguese bonds in recent days, fearing the country will fail to cut its budget deficit. The spread on its 10-year government bonds versus German bunds reached euro lifetime highs on Tuesday above 450 basis points but narrowed to 437 basis points on Wednesday.
"I don't expect any big pressure on Portugal to step up fiscal consolidation between now and the end of the year because the end of the year is almost there," the first source said.
"But the 2011 budget should be as tight as possible."
(Reporting by Jan Strupczewski, editing by Patrick Graham)