It turns out the Greek economy is in an even worst state than was thought.
Its budget deficit last year was far larger than expected according to the European Union’s statistics office which said the data may yet have to be revised again due to its unreliability.
Eurostat said the 2009 deficit was 13.6 percent of gross domestic product, almost one percent higher than the 12.7 percent reported earlier.
The news dragged down the value of the euro and sent the cost of Greek borrowing skyrocketing.
The European Commission said Greece is still on track to reduce its deficit by four percent this year but it will have to intensify deficit cutting efforts in 2011 and 2012.
That will further anger the trade unions who continue to strikes and demonstrate in protest at previously announced austerity measures.
A few hours after that announcement Moody’s Investors Service cut Greece’s sovereign debt to A3 and said it was likely to reduce the rating further unless the deficit-stricken government restored market confidence.
Moody’s cut Greece’s government bond ratings one notch, from A2, citing “a significant risk that debt may only stabilise at a higher and more costly level than previously expected”.