Fresh ratings downgrade rocks beleaguered Greece
Published 03/06/2011 | 08:00
Credit rating agency Moody's has downgraded Greece's bond ratings deeper into junk status, a further blow to the struggling country which has been wrapping up negotiations for a vital fifth instalment of international bailout loans.
Moody's downgraded Greece by three notches from a B1 rating to Caa1 with a negative outlook, citing increased risk that the financially stricken country will be unable to handle its debt problems without an eventual restructuring - resulting in paying creditors less than the full amount, or later than originally anticipated.
The agency also cited "the country's highly uncertain growth prospects" and the missed targets in budget reforms being carried out in return for a €110bn (£97bn) bailout package from the International Monetary Fund and other European Union countries that use the euro.
"The first trigger for the downgrade is Moody's view that Greece is increasingly likely to fail to stabilise its debt ratios within the time frame set by previously announced fiscal consolidation plans," the agency said, adding that the government had "failed to achieve a number of the fiscal consolidation targets in 2010".
Moody's said that over a five-year period, around half of Caa1-rated countries, corporate or financial institutions have met their debt obligations on time, while the others have defaulted.
The finance ministry in Athens attributed the downgrade to "intense rumours in the printed and electronic press" and said Moody's failed to take into account the government's commitments in order for it to achieve its fiscal targets in 2011.
The government is also concluding negotiations with the EU, IMF and European Central Bank so it can receive the fifth instalment of its bailout loans later this month, worth €12bn (£10.6bn).
The outcome of the negotiations will depend on a review of the country's finances by the EU and IMF due to be published by the end of this week.
The talks are considered key to providing possible additional bailout assistance next year, as Greece remains frozen out of the bond markets by high interest rates.
They will also cement details of a midterm austerity programme due to run from next year to 2015.
The size of the bailout provided to Greece by the IMF and EU