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Wednesday, 13 January 2010 - 12:38

Moody´s Sees Downwards Rating Pressure For Greece

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Greece and Portugal "are facing downward ratings pressure" as they implement "politically difficult fiscal retrenchment," Moody´s said Wednesday in a report, according to Dow Jones Newswires.

The agency said Greece and Portugal´s competitiveness gap within the euro zone can hit tax raising capacity, meaning the risk of a "slow death" is high, but that the risk of a "sudden death" in the shape of a balance-of-payments crisis is negligible. 

“There is still time for governments to act to avoid this situation, but the window of time that they have in which to act will not be open indefinitely,” the report warns according to Bloomberg. “Portugal has more time to act to reverse this trend, which is why there is a negative outlook on its Aa2 rating.”

“In contrast, Greece has significantly less time to address the issue, largely because the deterioration in public finances has been much more dramatic of late,” it said.

It said the risk of “sudden death,” in the form of a balance-of-payments crisis was “negligible.”

In the same report, Moody´s says its European sovereign Aaa credit ratings  "seem secure at the moment," but the rating agency´s assumptions about which countries can restore economic and fiscal health "particularly in the Aa to A range, will be tested."

"The global recession has exposed divergences between the relative economic performances of European countries in the Aa to A ratings range," Moody´s noted.
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