Greece slams rating agencies after Moody’s cut
Monday, March 7, 2011
LONDON (AP) — Greece launched a tirade against credit ratings agencies Monday after Moody’s downgraded its debt grade further below junk status, warning the bailed-out euro country might have to restructure its massive debts.
The agency said it is lowering its rating by three notches to B1 from Ba1 and warned it may cut again if the government’s commitment to its austerity program wanes or international benefactors become less willing to support it — Greece was saved from bankruptcy last May after accepting a 110 billion ($154 billion) bailout from partners in the EU and the International Monetary Fund.
The Greek government’s response was quick and critical. It said Moody’s downgrade was “completely unjustified” and “does not reflect an objective and balanced assessment of the conditions Greece is presently facing.”
“Ultimately, 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.
As well as warning that the government’s economic program may not yield the intended drop in debt and return to growth, Moody’s noted the considerable difficulties Greece has in raising revenues. It highlighted the risk of more onerous conditions when the current bailout package ends in 2013.
“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,” Moody’s Investor Services said.
The Greek finance ministry queried the timing and the multinotch nature of the downgrade, describing them as “incomprehensible.”
It added that Moody’s analysis fails to properly take into account the “upside impact” on the economy from the government’s fiscal consolidation and structural reforms program.
“Having completely missed the build-up of risk that led to the global financial crisis in 2008, the rating agencies are now competing with each other to be the first to identify risks that will lead to the next crisis,” it added.
Moody’s main rivals, Standard & Poor’s and Fitch Ratings, rate Greece’s slightly higher at BB+ though S&P has recently warned that it may lower its view soon.
Nicholas Paphitis in Athens contributed to this story.