Greece hits out at ratings agencies
By Pan Pylas |
March 8, 2011, Tuesday
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Print Edition
Print Edition
GREECE launched a tirade against credit ratings agencies yesterday after Moody's downgraded its debt grade further below junk status, warning the bailed-out euro country might have to default on its massive borrowings.
The agency slashed its rating by three notches to B1 from Ba1 and warned it may cut again if the government's commitment to austerity wanes or international creditors become less willing to support it - Greece was saved from bankruptcy last May after accepting a 110-billion euro (US$154 billion) bailout from partners in the European Union and the International Monetary Fund.
The Greek government's response was quick and critical. It said Moody's downgrade was "completely unjustified" and "does not reflect an objective and balanced assessment" of Greece's actual economic prospects.
"Ultimately, Moody's downgrading of Greece's debt reveals more about the misaligned incentives and the lack of accountability of credit ratings agencies than the genuine state or prospects of the Greek economy," the finance ministry said.
It said the agencies - rivals Standard & Poor's and Fitch Ratings have also downgraded struggling countries like Greece heavily in past months - were trying to make up for failing to predict the financial and debt crises.
"Having completely missed the build-up of risk that led to the global financial crisis in 2008, the ratings agencies are now competing with each other to be the first to identify risks that will lead to the next crisis," the ministry said.
In explaining its downgrade, Moody's warned the Greek government's economic program may not yield the intended drop in debt and return to growth, and noted its considerable difficulties in raising revenues. It also highlighted the risk of more onerous conditions when the current bailout package ends in 2013. "The risk of a post-2013 restructuring might lead the Greek authorities and investors to participate in a voluntary distressed exchange before that time," Moody's Investor Services said.
The Greek finance ministry queried the timing and the multinotch nature of the downgrade, describing them as "incomprehensible" in the wake of the government's success in cutting its budget deficit by 6 percent in 2010 to around 9 percent of the country's national income. It has pledged to bring the deficit to the EU limit of 3 percent by 2014.
Credit ratings agencies have been criticized in recent years for having presented a too-rosy view of the global economy in the run-up to the financial crisis, which led to the deepest recession since World War II and ignited worries about the state of government finances.
The agency slashed its rating by three notches to B1 from Ba1 and warned it may cut again if the government's commitment to austerity wanes or international creditors become less willing to support it - Greece was saved from bankruptcy last May after accepting a 110-billion euro (US$154 billion) bailout from partners in the European Union and the International Monetary Fund.
The Greek government's response was quick and critical. It said Moody's downgrade was "completely unjustified" and "does not reflect an objective and balanced assessment" of Greece's actual economic prospects.
"Ultimately, Moody's downgrading of Greece's debt reveals more about the misaligned incentives and the lack of accountability of credit ratings agencies than the genuine state or prospects of the Greek economy," the finance ministry said.
It said the agencies - rivals Standard & Poor's and Fitch Ratings have also downgraded struggling countries like Greece heavily in past months - were trying to make up for failing to predict the financial and debt crises.
"Having completely missed the build-up of risk that led to the global financial crisis in 2008, the ratings agencies are now competing with each other to be the first to identify risks that will lead to the next crisis," the ministry said.
In explaining its downgrade, Moody's warned the Greek government's economic program may not yield the intended drop in debt and return to growth, and noted its considerable difficulties in raising revenues. It also highlighted the risk of more onerous conditions when the current bailout package ends in 2013. "The risk of a post-2013 restructuring might lead the Greek authorities and investors to participate in a voluntary distressed exchange before that time," Moody's Investor Services said.
The Greek finance ministry queried the timing and the multinotch nature of the downgrade, describing them as "incomprehensible" in the wake of the government's success in cutting its budget deficit by 6 percent in 2010 to around 9 percent of the country's national income. It has pledged to bring the deficit to the EU limit of 3 percent by 2014.
Credit ratings agencies have been criticized in recent years for having presented a too-rosy view of the global economy in the run-up to the financial crisis, which led to the deepest recession since World War II and ignited worries about the state of government finances.
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