Moody’s cuts its outlook on Greek bonds

Ratings agency Moody’s cut its outlook on Greek government bonds yesterday due to expectations public debt levels will rise and the country’s limited ability to bounce back from the global crisis. Greece’s public debt, the second highest in the eurozone, and bloated budget deficits have recently raised concerns about the country’s ability to meet borrowing needs as the slowdown weighs on tax revenues. The agency changed its outlook for Greek government A1 bond ratings to stable from positive and said an upgrade is unlikely in the next 12-18 months. The «global synchronized downturn is taking its toll on the Greek economy as it is on other advanced economies, with growth coming to a halt and public debt ratios reversing their decline from previous years,» Moody’s said. »However, on a relative basis, Greece is so far less affected than many of its rating peers,» said Arnaud Mares, senior vice president of Moody’s Sovereign Risk Group. Greek economic growth this year is expected to drop off to 1.1 percent, from 3 percent in 2008, according to the country’s updated stability plan. The European Commission sees the figure at 0.2 percent. Although many economists believe the economy will avoid falling into recession, Greece’s poor level of international competitiveness will harm attempts to recover from the downturn. «Furthermore, the political environment – evidenced by the riots across the country last year – lacks the strong national consensus needed to implement bold fiscal reforms,» Moody’s added. The stability plan also sees the budget deficit in 2010 narrowing to 3.2 percent of gross domestic product (GDP) from a targeted 3.7 percent this year. Economy and Finance Minister Yiannis Papathanassiou admitted yesterday that he was looking at ways to up taxes. «All the scenarios (in the press) about extra taxes are thoughts, ideas, recommendations, proposals of different types and not government decisions,» he told reporters. [email protected]

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