Moody’s issues warning to Greece

Moody’s placed Greece under close supervision yesterday, one week after Fitch lowered the country’s credit rating, while Standard & Poor’s seemed reluctant to proceed with a similar move for at least the time being. International rating agency Moody’s announced that although it is not downgrading the country’s credit rating yet, it is placing its current A1 rating under revision due to the considerable deterioration of the govenment’s fiscal figures over the last 20 days. «The deterioration of the public finances creates strong doubts regarding their viability,» noted Arnaud Mares, vice president of Moody’s Sovereign Risk Group. He added that «the situation is further worsened by the negative prospects of the international economic environment.» The firm argued that «the failure of previous reforms to have substantial results and the continuing deterioration of the deficit in 2009 show the size of the challenge.» Mares stressed that additional pressure for Greece’s cost of borrowing to rise is not out of the question. Standard & Poor’s, which had downgraded Greece last January, stated yesterday that «any future development in evaluation will depend on the plans of the government regarding the fiscal cleanup and their application.» The Finance Ministry reacted to the news from Moody’s calmly, with officials suggesting that the markets had already factored in this development. They went on to dub Moody’s response «mild,» as they recognize that there is a problem with Greece’s credibility and stating that «regaining our lost reliability will take time, although we are starting to have an understanding with international agencies.» Moody’s announcement did have a direct effect on the Greek bonds market, with the spread between the benchmark 10-year Greek bond and that of Germany growing from 135 points on Tuesday to 142 points yesterday. The local bourse also suffered losses on a day of gains across Europe and in the USA.