March 7, 2011
Moody's Investors Service has today downgraded Greece's government bond ratings to B1 from Ba1, and assigned a negative outlook to the rating. The rating action completes a review that commenced on December 16, 2010.
Moody's decision to downgrade Greece's rating is driven by three reasons:
1.) 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.
2.) The country continues to face considerable difficulties with revenue collection.
3. ) There is a risk that conditions attached to continuing support from official sources after 2013
will reflect solvency criteria that the country may not satisfy, and result in a restructuring of existing debt. Moreover, the risk of a post-2013 restructuring might lead the Greek authorities and investors to participate in a voluntary distressed exchange before that time.
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.
Greece's country ceilings for bonds and bank deposits are unaffected by today's rating action and remain at Aaa (in line with the Eurozone's rating). Greece's Non Prime (NP) short-term rating is also unaffected by this action.
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