* Portugal short-term borrowing costs hit 5.8 percent
* Ireland bank assets repriced after stress tests
* Bailout remains on for Portugal, Spain seen sheltered
(Corrects figure for 2010 Porgtuguese budget deficit in paragraph 4)
By Andrei Khalip and Carmel Crimmins
LISBON/DUBLIN, April 1 (Reuters) - Portugal's successful debt sale on Friday did little to ease speculation it will soon join the euro zone bailout list, while investors repriced Irish assets after absorbing the results of bank stress tests.
Portugal sold 1.645 billion euros of short-dated bonds, but had to offer an interest rate of 5.79 percent to attract buyers. That was lower than other current market rates but 2.5 percentage points more than it paid at auctions of similar bonds last year.
The result means Lisbon is now having to pay a higher interest rate to borrow money for the next 15 months than Spain is paying to raise funds for 10 years -- a clear indication of how much risk investors now attach to Portugal.
Underscoring the tenuous nature of the government's finances, the statistics agency had to restate the 2010 budget deficit on Thursday, increasing the shortfall to 8.6 percent of gross domestic product from 7.3 percent.
The adjustment was down to methodology and will not affect 2011 figures, but still undermines broader confidence.
Financial markets are convinced Lisbon will have to ask the European Union and International Monetary Fund for a bailout, but Portuguese leaders are adamantly opposed. Credit ratings agencies have already downgraded Portugal.
Caretaker Portuguese Prime Minister Jose Socrates, who resigned last week after parliament rejected his latest plans for cutting spending, has made it a point of honour not to accept EU/IMF help and is likely to hold that line until new elections.
Portugal's president dissolved parliament on Thursday and set June 5 as the date for the next polls, meaning the country is effectively in limbo for two more months. The caretaker government does not have the power to request a bailout.
While Portugal can probably go on funding itself for the next eight weeks -- it has to refinance 4.3 billion euros ($6.1 billion) of debt in April and 4.9 billion in June -- the cost of doing so is likely to go on being punitively high.
Richard McGuire, a debt strategist at Rabobank, said that while Friday's auction showed the government could still tap the markets if needed, the long-term trend was not encouraging.
"This does not, though, obviate the fact that (Portugal) is fundamentally insolvent -- i.e. it is clearly in a situation where debt will have to be issued to cover servicing costs, thereby resulting in a snowballing of liabilities."
IRELAND WAKES UP TO BIG BANK BILLS
The debt crisis in the euro zone has already consumed Greece and Ireland and shows few signs of relenting, despite the fact that international investor attention has shifted to events in Japan and the United States and to the unrest in North Africa.
Greece, which agreed 110 billion euros of bilateral loans with the EU and IMF last May, is making efforts to cut spending and increase revenue to overhaul its economy, but questions remain about whether it can get on top of its finances.
With debt approaching 150 percent of GDP this year, economists say the burden is bordering on unsustainable. That makes a debt restructuring more likely unless Athens can maintain a high primary surplus and generate more than 50 billion euros of income from privatisations.
In Ireland, which received an 85 billion euro package of aid from the EU and IMF in November, stress tests on Thursday showed that the four troubled banks examined needed a further 24 billion euros to be properly capitalised.
That was in line with market expectations and, coupled with the European Central Bank's decision to suspend collateral requirements for loans from Ireland, gave the Irish banking sector a minor lift on Friday.
The European Commission said it believed the stress tests had been "extremely rigorous" and that there should now be no more surprises lurking for the financial markets.
Some analysts seemed to share that view, with Barclays Capital saying in a research note that there was reason to be reassured, although the restructuring, in its view, should include some bank bondholders taking on losses.
"The government had already indicated that they would seek some bail-in by bondholders in the spirit of burden-sharing," Barclays said. "As we have indicated... we consider burden sharing as a sine qua non for a successful fiscal consolidation plan and hence for sovereign solvency."
But Ireland still has accumulated bank liabilities of nearly 45 percent of GDP and will have total debts of well over 100 percent of GDP if forecasts from the stress tests are right.
With low growth prospects this year and unemployment of more than 13 percent, Ireland is in a race to get its economy back in gear before its debts become too much of a burden. If the European Central Bank raises interest rates this month as expected, the impact on growth and debts will be even greater.
Portugal finds itself in a similar conundrum. It's economy is forecast to contract by around 1.0 percent this year, according to the lastest European Commission forecasts, and unemployment is 11 percent and rising. Under those conditions, the debt-to-GDP ratio will climb without the debt increasing.
Spain, though, continues to look as if it has done enough to stave off the pressure from financial markets, despite its 10 year bond yields standing at 5.03 percent, with the spread over German Bunds at more than 160 basis points.
While Spain shares many of the features of Ireland and Portugal -- high deficit, high public sector debt, structural banking issues -- it has bitten the bullet on making spending cuts and retooling its economy.
"Resilience in the Spanish macroeconomic performance since the summer of 2010, in spite of painful fiscal consolidation and very elevated unemployment, is likely into the next few years," Deutsche Bank said in an economic report.
"This country should be able to deliver a positive, albeit slow, growth rate consistent with a sustainable path for public debt," it said, pointing out that the sovereign interest rate spread over Bunds had stabilised over the past three months. (Additional reporting by Sergio Goncalves and Shrikesh Laxmidas in Lisbon, and by Charlie Dunmore in Brussels; writing by Luke Baker, editing by Patrick Graham)