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Greece reacts with fury as Moody’s slashes its credit rating again

Text by News Wires

Latest update : 2011-03-07

Moody’s slashed Greece’s credit rating again Monday, sparking anger as the country continues to struggle economically. The move comes days before euro zone leaders are set to meet to discuss plans for a permanent debt-rescue system.

AFP - Bailed-out Greece reacted furiously to Moody's decision to slash its credit ratings on Monday, only days before a crucial summit of eurozone leaders to discuss plans for a permanent debt rescue system.

"The rating downgrade announced by Moody's today is completely unjustified as it does not reflect an objective and balanced assessment of the conditions Greece is presently facing," the finance ministry said in a statement.

The finance ministry also blasted the rating agencies as a whole.

"Moody's downgrading of Greece's debt reveals more about the misaligned incentives and the lack of accountability of credit rating agencies than the genuine state or prospects of the Greek economy," it said.

Earlier Monday, Moody's slashed Greece's credit rating by three notches from Ba1 to B1 and warned it could be downgraded further given the risks to the country's stabilisation efforts.

Moody's said the downgrade reflected its concerns over Greek efforts to balance its strained public finances after Athens had to seek a bailout from the European Union and International Monetary Fund last year to avoid default.

"The fiscal consolidation measures and structural reforms that are needed to stabilise the country's debt metrics remain very ambitious and are subject to significant implementation risks, despite the progress that has been made to date," Moody's, one of the top three ratings agencies, said in a statement.

Moody's also said that although discussions are underway among eurozone policymakers "on the design of a longer-term support mechanism," they are "unlikely to have a very large impact on the overall debt burden" of Greece.

The Greek finance ministry retorted that "Moody's focuses its analysis exclusively on the downside risks" and that although it mentioned, it did not include the significant progress Greece has made in fiscal consolidation and structural reforms programme.

"Moody’s refers to uncertain conditions in the eurozone after 2013 and their impact on Greece’s debt, at a time when the European Union and the eurozone are still formulating their policies and there is an explicit commitment from member states to agree on a comprehensive solution to the crisis at the European Council in March," it said.

The Greek government also questioned the timing of the downgrade by Moody's as it comes just days before a special summit of eurozone leaders on March 11 and a full meeting of EU chiefs on March 24-25 that will decide the size, shape and scope of a permanent rescue fund for the single currency area.

Athens is seeking to strike a deal at the summit granting it a longer repayment period on the EU-IMF loan as well as a lower interest rate.

"At a time when the global economy is fragile and market sentiment is sensitive, unbalanced and unjustified rating decisions such as Moody’s (can) ... initiate damaging self-fulfilling prophecies and certainly strengthen the arguments for tighter regulation of the rating agencies themselves," the finance ministry warned.

"We have our own evaluation," said Amelia Tores, a spokeswoman for the European Commission. "We do these evaluations according to a regular calendar, at set times, and it is this evaluation that has to be taken into account."

Greece has suffered repeated downgrades in recent months from Moody's and fellow rating agencies Standard & Poor's and Fitch.

Moody's last downgraded Greece in June 2010 and put it on negative watch in December of the same year.

Greece was forced last year to turn to the IMF and the European Union for a 110-billion-euro (154-billion-dollar) bailout after investors demanded unsustainable rates of return to lend it fresh money.

The country is currently implementing a tough austerity programme to reduce its public deficit and managed last year to slash its huge budget deficit by an unprecedented six percent of total output, but at the cost of widespread pay cuts and tax hikes that have caused waves of strikes and protests.

The finance ministry said that "Moody's decision in no way affects the financing of the Hellenic Republic as it continues to draw funds from the Greek support mechanism."

The country returns on Tuesday to the international markets with a batch of six-month treasury bills worth 1.25 billion euros.

In its last six-month treasury bill sale in February, Greece raised 390 million euros at a yield of 4.64 percent.

Date created : 2011-03-07


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