March 7, 2011
The Greek government has accused ratings agency Moody's of acting recklessly after seeing its credit rating slashed again.
Moody's downgraded Greece by three notches on Monday morning, from Ba1 to B1 with a negative outlook, pushing it further into junk territory - B1 debt is classed as "highly speculative", and just five notches from the lowest possible rating.
The ratings agency warned that Greece is increasingly likely to default on its debts. It said there is uncertainty about the support available to Greece after 2013, when its current rescue package runs out, which could prompt a voluntary default within two years.
Moody's also questioned whether Athens will manage to implement its austerity plan, and criticised the country for failing to tackle its culture of "endemic tax evasion".
"The negative outlook on the B1 rating reflects Moody's view that the country's very large debt burden and the significant implementation risks in its structural reform package both skew risks to the downside," Moody's warned.
"While the Greek government has made some progress with the collection of value added taxes (VAT), Moody's notes that progress on income tax collection has been slower to improve – indeed, revenue shortfalls recorded in 2010 contributed to the upward revision in the country's deficit projections for that year," it added.
The downgrade was swiftly condemned by the Greek government. It said it was "completely unjustified", and ignored the progress made by Athens in recent months.
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