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The international agency Moody's lowered the credit rating of Greece by three points from B1 to Ba1 without excluding the possibility to further lower its assessment. Agency’s analysts explain its decision with the long lasting economic difficulties facing the Mediterranean country and the constant threat Greece to go bankrupt.

In its report on the status of the Greek economy, Moody's notes that financial stabilization measures are too ambitious and their implementation in practice is at risk, despite the progress to date. Greece continues to face serious difficulties in the statement of revenue. Tax revenues are insufficient, the fight against tax evasion will be slow and difficult and impairs the solvency of Greece. If the government manages to collect VAT, the collection of income tax is much slower.  

The agency is pessimistic about the statement of expenditure too. Whether it comes to reform loss-making state enterprises, stop wastefulness in health care or control military expenses, the work the Greek authorities have to do is huge. Many laws have been adopted by Parliament, but are not applied in practice.

The third reason for the Moody's decision is the financial aid which the country relies to obtain from the Troika of the International Monetary Fund, the European Commission and European Central Bank after 2013 and which is related to strict liquidity requirements. Greece is unable to meet them without rescheduling the payments of the debt, is the conclusion of the agency. Analysts believe that Greek debt rescheduling is inevitable after 2013 and this could make the Greek government and investors to sit around the table of negotiations and start to share securities before that date.

According to Moody's, Greek securities holders, however, will not be affected, but the possibility of bankruptcy or for compelling exchange of securities has increased since the last assessment of the agency made in June 2010. Agency’s analyst Sara Carlson told Bloomberg that the summit of the European Union on March 11 and 25 will not affect the long-term assessment of the Greek economy.

Moody's report was prepared after the agency’s examination of the Greek economy, which began on December 16, 2010.

The Greek Ministry of Finance defined Moody's decision as completely ungrounded and lacking objective reasons. According to it, the agency has not paid attention to the great progress that Greece has made in recent months to reform its economy.  Reasonably, the Greek Ministry of Finance is disappointed with the unfavourable rating of Moody's, which comes just a day before Greece issues the next short term bills which it will have to pay after 6 months. Athens is aiming to obtain tomorrow 1250 billion euros from international markets, and hopes that the amount could reach 2 billion euros if less favourable offers are accepted. Money is crucial for the indebted economy which in March will have to pay old bills amounting to 1450 billion euros. The Greek Debt Management Service has announced yet another auction of securities on March 15, when three-month bills will be issued. Greece’s total obligations to its creditors amounted to 12 900 billion in March.

Moody's decision is expected to influence the interest rates at which Greece will buy money from international markets. Standard & Poor's warned last week that it is likely to lower the credit rating of Greece too. Currently, according to S&B it is BB+. The third global credit rating agency Fitch also warned last week that it will lower its assessment for Greece.

The news about the Moody’s decision soon became Greek media’s leading headlines. "Moody's shock - lowering" is the title of Ethnos newspaper. "Third grade blow at the credit rating of Greece" says the online edition in.gr. Zougla.gr stresses that "The lowering by Moody's is not justified". "New lowering by Moody's" reports Kathimerini newspaper. At the same time, the US Wall Street Journal reports that Greece’s credit rating lowering is not surprising since markets have warned about it long ago. According to the prestigious financial edition, Greece will emerge from the economic crisis only through privatization.

After Moody’s official announcement for the lowering of the credit rating of Greece by three points the spread yield of Greek securities increased to 901 basis points, while the Euro value against the US dollar dropped by 0.1 per cent and reached $ 1.3975.