* PM's resignation seen leading to snap election * Decision by president unlikely on Friday
* Credit ratings downgraded
* Poll gives lead to Social Democrat opposition
(Updates with politicians' comments, PSD policy, ESM)
By Axel Bugge and Shrikesh Laxmidas
LISBON, March 25 (Reuters) - Portugal's president consulted political leaders on Friday on whether to call a snap election -- as most parties want -- after the Socialist prime minister resigned.
The crisis could force Portugal to request a bailout from the European Union and International Monetary Fund after months of desperate struggle to avoid one, becoming the third euro zone country to seek aid, after Greece and Ireland.
The crisis, which was sparked by parliament's rejection on Wednesday of government austerity measures, prompted Standard & Poor's and Fitch to downgrade Portugal's credit ratings.
S&P's two-notch cut, which came with a warning it could downgrade the debt-laden state further as soon as next week depending on the final shape of the euro zone bailout fund, hit the euro, although the currency later recovered. S&P now rates Portugal lower than Ireland.
European leaders on Thursday gave themselves until June to finalise an increase in their temporary bailout facility, failing to deliver the "comprehensive package" to resolve the debt crisis they had promised for weeks.
A sell-off in Portuguese bonds pushed the yield on its 10-year benchmark above 8 percent, a euro lifetime high and a cost of funding that is widely viewed as unsustainable.
The spread between Portuguese debt and safer German Bunds widened 13 basis points to 474 basis points, while the cost of insuring its debt against default also rose.
President Anibal Cavaco Silva met first with the leaders of the small Green Party and the Communists, who both left saying they had recommended a snap election at the beginning of June.
"We think the best option is an election," said Communist leader Jeronimo Sousa. "We pointed to the start of June as a possible time."
Cavaco Silva will meet with the main opposition Social Democrats and the ruling Socialists late in the afternoon.
SOCRATES AT EU SUMMIT
Prime Minister Jose Socrates was attending a summit of European Union leaders in Brussels on Friday. Concern about Portugal dominated the meeting even if leaders chose not to discuss it openly. Socrates submitted his resignation to the president on Wednesday after parliament rejected austerity measures proposed by his minority Socialist government to try to avert a bailout. The president must first hear the six parties represented in parliament to see if there is a chance of a coalition cabinet being formed. But analysts consider such an option unlikely after the main opposition Social Democrats (PSD), who lead in opinion polls, said they wanted an election.
PSD leader Pedro Passos Coelho said on Thursday he would prefer the country to avoid a bailout and has committed himself to meeting the budget deficit goals promised to Brussels. His party has not said clearly how it plans to meet the budget goals but has not ruled out raising value-added tax.
Rating agency Moody's on Friday maintained Portugal's A3 grade with a negative outlook, citing "strong commitment to fiscal consolidation by both leading political parties".
"Mixing political crisis with lack of an austerity package and a bond market that is unwilling, that is not a situation that can carry on for very long at all, so I think we're moving towards the endgame where Portugal is forced to seek help," said Robert Rennie, strategist at Westpac Bank.
An opinion poll on Friday showed the PSD would win an absolute majority if elections were held today.
Cavaco Silva's next move will be to summon his Council of State advisory body, after which he can dissolve parliament and call an election, which by law cannot be held until late May. His final decision is unlikely to come on Friday.
Socrates will retain full powers until Cavaco Silva accepts his resignation, which may not be until after the Council of State meets. He is likely to stay on as a caretaker premier with limited powers until a new government is formed.
The Socialists' fall has left Portugal in limbo, with legal experts guessing whether a caretaker government could ask for an international rescue if needed. Portugal has a large volume of debt maturing in the next few months.
At the summit, Socrates made clear his continued opposition to Portugal asking for a bailout, which has said would damage the economy and mean more sacrifice for the Portuguese.
Most economists agree Lisbon should be able to repay around 4.3 billion euros ($6.05 billion) of bonds falling due in April, but 4.9 billion euros due in June may trigger a request for aid. (Additional reporting by Axel Bugge; Editing by Catherine Evans)