Greece may have got its second EU/IMF bailout, but the ratings agencies still think that is just kicking the can further down the road and Moody’s has cut its credit rating even further.
It means Athen’s government bonds – if it could even find buyers for such things – would be considered to be almost worst kind of junk, unlikely to ever be repaid.
Moody’s now has Greece at Ca many levels behind the top AAA rating – and the lowest of any country in the world that Moody’s covers.
It is taking the same lines as Fitch, which last week said it considers Greece to be in ‘restricted default’.
Moody’s also said it was almost certain to slap a default tag on its debt as a result of the latest rescue package.
“The announced EU programme along with the Institute of International Finance’s statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent,” Moody’s said in a statement.
The financial markets also have doubts that the fresh aid package for Greece will protect bigger economies like Spain and Italy from contagion. So the cost of insuring their debt against default rose.
For Greece, the latest ratings downgrade is academic as it will be years before Athens will be able to borrow money from private investors.
Greek bank shares and the broader stock market barely reacted to Moody’s action. Analysts said the downgrade and the default warning were priced in and less worrying following assurances provided by the EU deal.
The Athens government has repeatedly criticised ratings firms for their downgrades and its spokesman threatened to end its subscriptions to these agencies as the new rescue package means Greece will not issue new bonds for years.
“All governments pay a subscription to these agencies. We, I think, do not need the reviews anymore. They have no practical value,” Elias Mosialos said in a radio interview. “Perhaps the finance ministry should end its subscription.”