Moody’s downgrades Greece
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Moody’s Ratings Agency has downgraded the sovereign debt of Greece to A3 from A2 and warns of further possible downgrades ahead.
Greek debts have continued to take a battering from the markets this week in light of its substantial debt problems. Earlier this month Fitch also downgraded Greek debt to one notch above junk status.
Moody’s says it has downgraded the debt due to the fact that its economy may demand more assistance than previously thought. Both the European Central Bank and the International Monetary Fund have pledged €45bn in loans to Greece. As yet, Greece has not decided to take any of the pledged funds.
This comes after new data revisions from Eurostat found that the Greek deficit is running at 13.6 per cent of GDP, not at 12.7 per cent as originally thought.
The news comes as yields on 10-year Greek debt has risen to 8.72 per cent, the highest since the country entered the Euro. The Euro also fell to lows not seen since May 2009, down to $1.325 on the back of Greece’s continued troubles.
Moody’s sovereign risk group and lead analyst for Greece Sarah Carlso says: “Although the Greek government appears to be on, or even ahead of, schedule in terms of the implementation of the actions laid out in its stability and growth programme, the difficult environment has made continued adherence to the programme considerably more challenging.”
Moody’s also blames Europe’s “fractious mobilisation of external assistance” as a reason for concern. Germany has been the lead critic of any sort of Greek bailout as it will have to give nearly €9bn of the €30bn pledged by the ECB.
According to Reuters, the German Free Democrats party, which shares power with Chancellor Angela Merkel’s conservative Christian Democratic Union, has hinted that Greece may have to leave the single currency if it doesn’t go even further with cuts.
FDP finance expert Frank Schaeffler is reported to have said: “If Greece cannot push through these austerity measures, it must opt out of the euro zone voluntarily.”
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