BRUSSELS (MNI) – The downgrading of Greek sovereign debt to junk
status by one of the three largest ratings agencies on Monday does not
reflect the strides Greece has taken to reduce the country’s large
deficit, the Greek Finance Ministry said on Monday.

“Moody’s downgrade of Greek government bonds today does not reflect
in any way Greece’s progress over the past months,” the Greek finance
ministry said in a statement.

“Nor does it reflect the potential created by the country’s effort
of fiscal consolidation and increased competitiveness,” the ministry
continued.

Earlier Monday, ratings agency Moody’s said it was cutting Greece’s
sovereign debt rating by four notches to Ba1 from A3, thus pushing it
below investment grade to “junk” status. Greek bonds are already rated
as junk by one of the other three large ratings agencies, Standard &
Poor’s.

The ECB, to calm markets and weaken the influence of the rating
agencies on them, announced earlier this year that it would accept Greek
bonds as collateral at its refinancing auctions regardless of the
ratings on them.

In response to Moody’s downgrade, the Greek finance ministry
reiterated that the latest data show a 40% reduction in the budget
deficit in the five months through May compared to the same period a
year ago.

That shows that “the programme that Greece has agreed on with the
European Commission, the European Central Bank and the International
Monetary Fund is on track, a development recognized by all three
institutions,” the finance ministry said.

“Greece is moving ahead with all the reforms stipulated in the
Memorandum of Understanding, while for many of these reforms, it is
already ahead of schedule,” the finance ministry said.

Greece was bailed out to the tune of E110 billion by its Eurozone
partners and the International Monetary Fund after it revealed its
budget deficit was 13.6% of its gross domestic product and markets
worried that it could default. In return for the loans, the Greek
government said it would adhere to a strict set of austerity measures to
rein in the deficit, which is more than four times the EU’s stipulated
3% limit.

Ratings agencies have come under scrutiny because some financial
officials feel that the three largest agencies wield too much power over
the financial markets.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]