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UPDATE 1-Portugal seen taking bailout by April -euro zone source

* Consensus growing that Portugal will need bailout

* End of March seen as crisis point for Lisbon

(Adds quotes, details, background)

BRUSSELS, Feb 17 (Reuters) - European Union member states are increasingly concerned about Portugal’s ability to fund itself in financial markets and believe Lisbon will need to seek a bailout by April, a euro zone source said on Thursday.

The EU has discussed a rescue plan for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance.

“Portugal is drowning, it’s not going to be able to hold on beyond the end of March,” the euro zone finance source said. “That’s already understood to be the case in financial markets, but now it’s also understood among (EU) finance ministers.”

Portuguese officials have said in recent days that it is up to Europe as a whole to resolve the debt crisis, sending the message that if the EU can agree a “comprehensive package” to tackle the crisis by a summit set for March 24/25, that will help Portugal weather the pressure from financial markets.

Cabinet Minister Pedro Silva Pereira repeated that line on Thursday, saying that Portugal was doing all it could to cut its budget deficit and that it was now up to the rest of the euro zone to do its bit and agree the “comprehensive package”.

“Any delay of an effective European response to confront this situation damages all the countries and the euro itself,” Silva Pereira told reporters after a cabinet meeting.

“That is why our message is that Portugal is doing its work. Europe also needs to do its part.”

Portugal is so far managing to fund itself at the short end of the yield curve, but the cost of borrowing is now close to or at record highs and is becoming increasingly punitive.

On Thursday an auction of 5-year bonds sold at a record high yield of 7.126 percent. The spread of Portuguese 10-year bond yields over benchmark Bunds rose to 432 basis points, an indication of the increased risk of holding Portuguese debt.

Filipe Silva, the head of debt management at Banco Carregosa in Lisbon, said there would be no problems finding demand for Portuguese debt at auction until the European summit on March 24/25, but after that the situation could change.

“We will manage until March without a bailout and as of then, depending on what is decided, we will see,” he said.

The EU has been concerned about Portugal’s situation since late last year, when it began making contingency plans.

European Commission President Jose Manuel Barroso, a former Portuguese prime minister, had not wanted to get involved in the matter, but on Monday he met Portuguese Prime Minister Jose Socrates and President Anibal Cavaco Silva in Lisbon to discuss the issue.

Because Portugal is managing to fund itself in the markets currently, and does not suffer an acute refinancing crunch until April and then in June, sources said the immediate crisis point had not yet been reached but was drawing closer.

“We haven’t yet entered the peak phase of the crisis,” another EU source said.

Portuguese newspaper Journal de Negocios reported on Thursday that Germany was putting renewed pressure on Portugal to seek international help immediately.

Euro zone leaders are scheduled to meet on March 11 to decide the next steps in tackling the year-long crisis, including what elements should be in the “comprehensive package” and whether the euro zone bailout fund, the 440 billion euro European Financial Stability Facility, should be strengthened.

Failure to reach an agreement on the “comprehensive package” by the end of March would undermine confidence in the euro zone’s ability to handle the crisis and would be likely to ratchet up the market pressure on Portugal still further. (Additional reporting by Axel Bugge in Lisbon and Luke Baker; Editing by Hugh Lawson)

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