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Moody's to lower the credit rating of Greece

17 December 2010 / 10:12:00  GRReporter
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Moody's, one of the three most influential international credit rating agencies along with Standard & Poor's and Fitch, announced it is to lower the Ba credit rating of Greece, as there is great uncertainty whether the country is able to pay its debt and there is also great slowdown in the revenue side in the 2010 budget. The Agency believes that if Greece fails to return to international markets it will be forced to require additional support and the uncertainty about its size and the conditions under which it will be granted is another reason for the Moody's decision.

The official release of the Agency reads that its observations will be focused around the growth of nominal GDP and the stability of public finances, which will affect the dynamics of the country's debt in the coming years. Nevertheless, it recognizes the serious progress in public finances discipline tightening in Greece. Standard & Poor's announced two weeks ago that discussions are held for lowering Greece’s credit rating BB+ if it turns out that the European mechanism for financial stability is favouring state institutions that hold Greek  securities to private ones. The Agency stated that the decision to drop the credit rating of Greece will be taken over the next three months.

The Greek external debt continues to be of economic minds’ concern worldwide. Financial Times made a forecast a few weeks ago that Greece will restructure its debt in the second half of 2011. Economist Intelligence Unit was even more specific a few days ago by providing 35-percent haircut in the Greek debt in 2012. The expectations of the American CitiGroup are also negative.

The Greek Finance Minister George Papaconstantinou expressed disagreement with the forecasts made. In Mega TV prime time news he pledged that Greece will return to positive growth in 2012 and will be able to independently pay its creditors in 2015-2016. "We've done it in the past and there is no reason not to do it again," was the only argument of the Minister to support his optimistic outlook.

Tags: Credit ratingEconomic crisisExternal debt reschedulingCreditors
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