Markets bet on Greek default as credit rating slumps again
Greece's credit rating has crashed once again and now stands on a par with Fiji and Vietnam.
Moody's Investor Services downgraded the eurozone nation's sovereign debt yesterday by three notches to B1 from Ba1, way below even troubled Ireland, Portugal or Spain. Not much more than a year ago Greece was an A1 risk, and is now firmly into "junk" territory. It suggests, once again, that international investors have little confidence in the country's ability to repay its debts, whatever new bailout mechanisms for the eurozone are eventually adopted by the heads of government summit in Hungary later this month.
Markets may also have been unnerved by suggestions from the freshly elected Irish government that it wishes to "renegotiate" the terms of its EU/IMF bailout. Greece received €110bn (£95bn) in assistance last spring. Moody's justified their move because of 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 credit agency also cast doubt on the ability of George Papandreou's government to deliver its austerity programme and on the Greek authorities' ability to gather taxes, a traditional weakness. "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," it said. "The country continues to face considerable difficulties with revenue collection."
Moody's explicitly raised the issue of default. "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," it said.
With the Greek economy threatening to relapse into recession as the cuts and tax hikes make their presence felt, its ability to service a debt running towards 150 per cent of GDP at an interest rate of more than 5 per cent has been a growing danger to stability since the eurozone rescue last May.
The yield on benchmark Greek 10-year sovereign bonds is again more than 12 per cent, and went wider again yesterday, in company with Portugal and Ireland. Pressure on Portugal, in particular, has barely abated since January despite the Chinese and Japanese authorities signalling support for eurozone bond issues. The credit markets have swung once again behind the idea of a Portuguese bailout, probably of around €50bn, well within the capacity of the current European Financial Stability Facility. Spain, however, continues to represent a possibly unaffordable expense.
The Greek finance ministry said the Moody's move was "incomprehensible" and did not properly take into account the "upside impact" on the economy from the government's structural reforms programme.
- 1 Man on naked bike ride gets ejected after becoming aroused
- 2 Fifa corruption: Europe plots to stage an 'alternative World Cup' in place of Russia 2018
- 3 How much sex should I be having?
- 4 Jaden Smith wears gender fluid dress to high school prom with Hunger Games actress
Caitlyn Jenner, formerly Bruce Jenner, reveals new look on Vanity Fair cover
Russian military jets and US destroyer clash in Black Sea 'posing danger to stability'
Ed Miliband returns to the backbenches but it's all a bit awkward as he tries to avoid eye-contact with fellow Labour MPs
Photographer who performed naked shoot in China's Forbidden City sparks outrage
Man on naked bike ride gets ejected after becoming aroused
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Why this year's general election was the most unfair in Britain's history
iJobs Money & Business
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...
£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...