ECONOMY

Greece hit by fresh downgrade

Fitch Ratings dealt the Greek economy a fresh blow yesterday evening by lowering the country’s credit rating by two notches amid concerns about the government’s ability to avoid a deepening of the recession, which are partly based on fresh data. Greece’s new rating by Fitch is BBB- from BBB+, meaning Greek debt is only just investment grade, but a further downgrade would render it nonacceptable. In its report Fitch referred to «ongoing uncertainties about the government’s financing strategy in the context of increased capital volatility, suggesting it is becoming ever more difficult for Athens to achieve its target of reducing the budget deficit to 8.7 percent of the gross domestic product this year, from about 12.9 percent in 2009. »Pressures on the banking system underline the adverse spillover from sovereign risk concerns on the wider economy, while contingent liabilities from the banking sector will increase as the government provides banks with increased guaranteed funding,» the report said. The new downgrade once again reversed the positive mood in Athens brought by a European Union deal to support the country’s economy, and came in the aftermath of more data that point toward an even deeper recession for the year. According to the Hellenic Statistical Authority (ELSTAT), the general index of industrial output in February posted a considerable 9.2 percent decline year-on-year, compared to a drop of 5.9 percent a year ago relative to February 2008. Also yesterday ELSTAT announced the soaring of the consumer price index to 3.9 percent in March from 2.8 percent in February, on an annual basis. The rise was attributed to hikes in the special consumption tax on fuel, tobacco and alcohol as well as value-added tax rate hikes. The average price of gasoline was the driving force for inflation as it soared by 50.9 percent last month compared with March 2009.