10 December 2009

Commissioner Almunia: Greece attracts attention of financial markets and rating agencies

The FT says Fitch has slashed its rating on Greek debt to BBB+ – the first time in 10 years a leading CRA has rated Greece below A. Standard & Poor’s may do the same. EU authorities are keen to put pressure on Athens to step up efforts to reduce its deficit.

The Financial Times is reporting that on Tuesday 8 December Fitch cut its rating on Greek debt to BBB plus – the first time in 10 years that a leading ratings agency has rated Greece below the A grade. Standard & Poor’s has also warned that a downgrade is possible. Prior to the global economic crisis, an A minus grade was the minimum requirement for assets put up by eurozone banks when taking part in ECB liquidity boosting operations. The threshold was reduced to BBB minus after the collapse of Lehman Brothers last year threatened to paralyse financial markets, but so far the ECB has only said that the lower standard will apply until the end of 2010.

This information gives us an idea of the delicate current situation in Greece. 

Moreover, Almunia said today that ‘The Commission is taking note of the fact that the sustainability of public finances in Greece draws the attention of financial markets and rating agencies. A difficult situation in one euro-area Member State is a matter of common concern for the euro area as a whole. It is clear that Greece faces very substantial economic and fiscal challenges. The Greek government has transmitted to the Commission and the Eurogroup its determination to restoring sound public finances. The draft budget adopted on 20 November is one important step in the right direction, but more measures are required. The Commission will continue to monitor the situation in Greece very closely, in close contact with the President of the Eurogroup, and stands ready to assist the Greek government in setting out the comprehensive consolidation and reform programme, in the framework of the Treaty provisions for euro-area Member States’.

 

Press release

FT article (subscription needed)

 

© Financial Times