Greek woes continue after ratings agency downgrade
Having just dusted itself off from a protracted tussle for more bailout funds, Greece's economy was hit with more bad news yesterday.
It was downgraded by ratings agency Fitch to "C" from "CCC", a move which indicates "that default is highly likely in the near term," Fitch said.
The agency said the move was in line with a warning it made earlier in the year pledging to lower its ratings on sovereign bonds to 'restricted default' should it complete a debt exchange.
On Tuesday, the 17-country eurozone approved Greece's second financial lifeline in less than two years, worth £100bn, and agreed to impose a £90bn debt writedown on banks and other private holders of Greek bonds.
The new austerity measures demanded by creditors in return for the rescue loans follow two years of deepening misery, with the Greek economy in freefall and unemployment at a record high. Angry unions have called two separate protest rallies outside Parliament as politicians scramble to adopt the emergency austerity laws.
Legislation tabled in Parliament outlines a total of £2.7bn in extra budget cuts this year agreed by the Cabinet last week.
The draft law also drastically revises the 2012 budget, changing the deficit target to 6.7% of gross domestic product from an forecast of 5.4%.
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Parliament is expected to vote on the cuts and budgetary revisions early next week.
Today, a debate will start at committee level on a separate draft law on adopting the private debt writedown. Parliament's plenary session will vote on the draft law on Thursday.
Both pieces of legislation are expected to be approved, as the interim governing coalition headed by Prime Minister Lucas Papademos controls 193 of the House's 300 seats. But earlier this month the two coalition partners - the socialists and the conservatives - were forced to expel 43 deputies who rebelled against new austerity cuts.
Meanwhile, the Fitch ratings agency said it has downgraded Greece further into junk status, from "CCC" to "C" following the announcement of the details of the country's debt swap deal with private creditors.
In June, the agency had said it would consider Greece to be in restricted default if the bond swap deal went ahead.