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August 14, 2022

Moody’s downgrades Greece to Caa1

Greece has agreed to EUR 6.4 bln in new steps to cut its 2011 budget deficit and aims to wrap up bailout talks with international inspectors by Friday, a senior government official told Reuters, Mediafax informs. Prime Minister George Papandreou would present the main points of the government’s medium-term budget plan when he meets Jean-Claude Juncker, the chairman of euro zone finance ministers, in Luxembourg on Friday, the official said. Greece and the inspectors made a late push on Thursday to agree the funding to keep Athens afloat. Greece’s credit rating has been cut again by rating agency Moody’s, from B1 to Caa1 – just five notches short of default, BBC News informs. The new rating means Greece is 50 pc likely to default on or restructure its debts in the next five years, according to Moody’s methodology.

The three-notch-downgrade takes Greece from B1 to Caa1, giving the country a worse credit rating than Montenegro. Meanwhile, Athens is completing the negotiations for drawing down the fifth tranche of its 110 bln euro bail-out from the EU and International Monetary Fund. Moody’s said it was very concerned about Greece’s “highly uncertain growth prospects” and warned that the embattled country is “increasingly likely to fail to stabilise its debt ratios” by the deadline set by its previous bailout. The Greek finance ministry blamed the rating cut on press rumours, claiming Moody’s had failed to take account of its austerity commitments for the current year. European policymakers have been pushing the idea of a voluntary postponement of repayments on Greece’s shorter-term debts, to be agreed with lenders.

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