Fitch downgraded Greece’s credit rating to triple-B-minus from triple-B-plus, one day after the ratings agency said Athens cannot delay asking the EU and IMF for cash .
The rate cut will make it even more expensive for Athens to borrow money and by the end of May it needs to borrow around 12 billion euros.
But before the ratings cut Greek Finance Minister George Papaconstantinou said things will get better.
He told reporters: “The interest rates at which the country is borrowing are obviously something that concern us. We consider that they don’t reflect the true state of the economy, nor the effort and the results that the government has already achieved. But as time goes on, I believe that these will be consolidated in the markets.”
Greek shares have been hammered against a dire economic background with industrial output slumping and inflation soaring.
But on Friday there came word from a European Union source that euro zone officials had agreed on the terms of possible loans to Athens – which would be close to what the IMF charges countries to borrow money.
In reaction, Greek bank shares rallied 7.1 percent.
Analyst Vassilis Vlastarakis from Beta Securities said for now the government can only press on with its austerity measures: “Greece needs 12 billion euros in May, there are several possibilities, one possibility is to issue treasury bills; at least it can find at least half of that amount in the next weeks. So the Greek government, in my view, should stop making any comments about the situation, I think they should stick to their programme, the programme is excellent.”
Meanwhile a German Finance Ministry spokesman said no one should doubt the euro zone and the IMF would help Greece if needed, although it had not requested help.
However EU sources said Germany believed any emergency loans should be made at close to current market rates which would not help Greece much.