Wed, Jun 16, 2010 page10

• Greece debt slashed to junk: Moody’s

  DOWNGRADE Moody’s was the second major ratings agency to accord Greek bonds junk status. Greece’s finance ministry, however, insisted that a recovery was on track

  • AP
  • • 
    • 
    • 

  Moody’s Investors Service slashed Greece’s credit rating to junk status in a new blow to the debt-ridden country, which is under intense international scrutiny after narrowly avoiding default last month.

  A Moody’s statement on Monday said it was cutting Greece’s government bond ratings by four notches to Ba1 from A3, with a stable outlook for the next 12 to 18 months. It was the second of the three major agencies to accord Greek bonds junk status. Standard & Poor’s did the same in late April.

  The downgrades reflect concern that the country could fail to meet its obligations to cut its deficit and pay down its debt — which the Greek government says is out of the question.

  In New York, traders seemed unfazed by the news, which only weeks ago would have sent stocks tumbling on fears that problems in Europe were worsening. However, traders don’t have any illusions about the financial problems Greece is facing.

  A Greek finance ministry statement insisted that the recovery effort was on track.

  It said the new cut “does in no way reflect the progress made in recent months, nor the prospects emerging from fiscal improvement and better competitiveness.”

  The downgrade came as a delegation from the EU and the IMF started an interim review of the country’s efforts to pull itself out of its major debt crisis.

  After amassing a vast public debt and overspending that sent its budget deficit spiraling to 13.6 percent of GDP last year, Greece was saved from defaulting on its loans last month by the first installment of a joint EU and IMF 110 billion euro (US$134.35 billion) bailout. It is to receive the second in September, pending implementation of a major austerity program that has sparked strong union reaction and a series of damaging strikes.

  “The Ba1 rating reflects our analysis of the balance of the strengths and risks associated with the Eurozone/IMF support package,” Moody’s lead analyst for Greece Sarah Carlson said.

  “The package effectively eliminates any near-term risk of a liquidity-driven default and encourages the implementation of a credible, feasible and incentive-compatible set of structural reforms, which have a high likelihood of stabilizing debt service requirements at manageable levels,” he said.

  “Nevertheless, the macroeconomic and implementation risks associated with the program are substantial and more consistent with a Ba1 rating,” he said.

  Greek Prime Minister George Papandreou’s center-left government announced painful austerity measures, slashing pensions and salaries while increasing indirect taxes, seeking to gradually bring the deficit down to 2.6 percent in 2014.

  However, Moody’s statement said the austerity package was “very ambitious.”

  “There is considerable uncertainty surrounding the timing and impact of these measures on the country’s economic growth, particularly in a less supportive global economic environment,” Carlson said.

  Athens says it has exceeded deficit-cutting targets in the first five months of this year, as a lower-than-expected increase in revenues was offset by higher spending cuts.

  The ministry said the deficit in the first five months stood at 8.97 billion euros, compared with 14.65 billion euros in the same period last year. The drop translates into a 38.8 percent reduction, more than the planned 35.1 percent cut.

  “All the agreed structural reforms are being implemented on track, and several are ahead of schedule,” it said.
• Most Popular

  • 1

    Hsieh and Hung win badminton doubles title at BWF Super 300 Macau Open

  • 2

    Three former employees of TSMC detained

  • 3

    Teenager Victoria Mboko upsets Coco Gauff

  • 4

    Magnitude 5.5 aftershocks possible after 6.2 quake

  • 5

    Jobe Bellingham says he’s anxious about following Jude at Borussia Dortmund