Arsonists attacked offices of Greece’s ruling Socialist Party in Athens on Friday as the country suffered a new credit blow ahead of a parliament debate on how to confront its massive debt.
Credit rating agency Standard and Poor’s downgraded two Greek banks and put two others on negative watch. International ratings agencies have delivered a series of heavy blows to Greece’s standing in recent weeks.
Greek Prime Minister George Papandreou has ordered major austerity measures to cut Greece’s 300 billion euro (US$436 billion) debt that has roiled markets and pushed down the euro currency, which Greece shares as a member of the eurozone.
The attacks on the six Socialist Party offices in Athens came hours after a day of protests by communist-led unions against the austerity measures.
DOWNGRADE
Markets were jolted meanwhile by a new credit downgrade.
Standard and Poor’s cut Eurobank and Alpha Bank to BBB from BBB-plus and placed National Bank of Greece, the country’s biggest private institution, and Bank of Piraeus, its fifth biggest, on negative watch.
S&P downgraded Greek sovereign debt on Wednesday, and Moody’s is expected to issue a judgement by Christmas after warning Greece in October that its grade could be cut.
Papandreou hit out at the power wielded by the agencies and said France and Spain would support him in the matter.
“The Spanish prime minister, for example, says agencies which answer to no one should not be able to make economies rise and fall ... this is not possible in a democratic country with a government elected on a clear program,” ANA quoted Papandreou as saying.
Speaking to reporters in Copenhagen, where he was attending the UN climate change conference, Papandreou said he expected Spanish Prime Minister Jose Luis Rodriguez Zapatero to make the agencies an issue during Spain’s European presidency, which begins next month.
Papandreou also mentioned French President Nicolas Sarkozy.
“He said the agencies which are rating us are the same ones that gave A grades to banks that collapsed the next day,” Papandreou said.
The interest rate which Greece has to pay to attract international savings to finance its overspending, via the bond market, has shot up in recent weeks and is now about twice the rate Germany has to pay.
CREDIBILITY
Greek Finance Minister George Papaconstantinou has just been on a three-day tour of European capitals seeking to salvage Greece’s financial credibility.
He was to lead the Socialist government’s call at a parliament debate yesterday for radical spending cuts to curb the debt and a deficit estimated at 12.7 percent of output.
The government’s targeted cuts already go beyond the planned deficit reduction of 3.6 percent included in next year’s budget.
The finance minister reaffirmed that he wants a bigger cut, saying he was aiming for a “more ambitious reduction” close to 4 percent.
European Central Bank (ECB) Vice President Lucas Papademos meanwhile urged Greek authorities to take “courageous” measures to tackle the swollen fiscal deficit.
Papademos, himself a Greek, said: “These measures would need to be decisive, substantial, and given the magnitude of the problem ... they would have to be courageous.”
Speaking at the ECB’s twice-yearly Financial Stability Review, Papademos further stressed that Britain, Ireland, Spain and the US also had large deficits and that “the issue is really global.”
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