Moody’s dubs Greek bonds ‘junk’

Moody’s downgraded Greece’s credit rating by no fewer than four notches yesterday, just as experts from the international organizations monitoring Greece expressed concern about the level of inflation. The international rating agency, the only one to have maintained Greece in the A category until yesterday, slashed the country’s rating from A3 to Ba1, taking it down to speculative investment level. This effectively takes Greek bonds down to «junk» status, mirroring fellow rating agency Standard & Poor’s decision a month and a half ago. In a statement explaining the move, Moody’s cited its considerable uncertainty regarding Athens’s plans to reduce its debt and budget deficit even with the EU-IMF rescue package of 110 billion euros. «The uncertainty represents a risk that leads Moody’s to believe that Greece’s creditworthiness is now consistent with a Ba1 rating, which incorporates a greater, albeit low risk of default,» the statement read. It added that Greece’s review was not yet complete and that the ratings outlook was stable: «The Ba1 rating reflects our analysis of the balance of the strengths and risks associated with the eurozone-IMF support package.» Finance Ministry officials expressed surprise at the decision, which they branded «untimely, given all the positive developments in the execution of the Stability and Growth Program.» Bank of Greece sources spoke of a «below-the-belt blow» and an «unjustifiable decision,» given that «we have entered the support mechanism and things are going better.» Or are they? The experts from the IMF, the European Commission and the European Central Bank, who yesterday started their task in Athens of monitoring the progress of the stability program, were worried about the country’s soaring consumer price index, although they did suggest that the other data were quite promising. May inflation came to 5.3 percent from 2.3 percent in January, due to hikes in special consumption taxes and in value-added tax. «There are some difficulties but we are proceeding as normal,» European Commission spokesman Amadeu Altafaj said.