Greek debt remains unsustainable despite action from the country’s foreign creditors this week, Moody’s Investors Service said Thursday.
Greece will most likely need some of the principal on its debts reduced eventually, the ratings company said in a regular credit report.
After 12 hours of talks at their third meeting in as many weeks, eurozone finance ministers and the International Monetary Fund on Tuesday agreed on a package of measures to reduce Greek debt by 40 billion euros, cutting it to 124 percent of gross domestic product by 2020.
The deal “will provide relief to the liquidity-starved Greek economy, but we believe that the country’s debt burden remains unsustainable,” Moody’s analysts said.
“The probability of a further default on privately held debt is high, and given that around 70 percent of the total debt stock is held by official creditors, only a reduction in principal on outstanding official debt would lead to a semblance of sustainability in Greece’s debt,” they said.