Fitch downgrades Greek credit rating
ATHENS, Greece – Fitch Ratings downgraded Greece’s credit rating on Tuesday, citing concern over public finances and doubts that the new government would be able to sufficiently contain the ballooning debt.
The downgrade came a day after another agency, Standard & Poor’s, warned it might downgrade its own rating on Greece’s national debt.
In a statement, Fitch said it was cutting Greece’s rating from A- to BBB+ — the worst in the eurozone — with a negative outlook.
“The downgrade reflects concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece, exacerbated by uncertainty over the prospects for a balanced and sustained economic recovery,” the statement said.
Finance minister George Papaconstantinou said the downgrade was a result of the previous conservative government’s policies.
“It does not reflect the initiatives the government has already undertaken,” he said. “We have clearly stated that we will do whatever is needed to come in line with the need for a medium-term reduction of the deficit.”
Papaconstantinou said he would present the EU Commisison with specific measures in January, and would if necessary table a supplementary budget in 2010.
Concerns about Greece’s public finances have increased ever since Prime Minister George Papandreou’s centre-left government — elected October 4 — announced that the budget deficit this year would be twice as high as expected.
At an estimated 12.7 per cent of the country’s gross domestic product, the deficit will be over four times the three per cent maximum fixed by EU budget rules.
Fitch recognised government efforts to improve fiscal transparency, and said it believed the target of a 9.1 per cent deficit in 2010 was “achievable”.
But the international agency added that government debt was likely to rise to close to 130 per cent of GDP before stabilising, and said it was not convinced proposed pension reforms, spending cuts and broadening of the tax base would be strong enough to materially reduce debt.
