Greece crisis: Moody's cut its rating after default

Moody's cut its credit rating for Greece to a deep-junk ‘Caa3’ from ‘Caa2’ as the country became the first developed economy to default on a loan with the International Monetary Fund (IMF).

The credit rating agency also warned that it is now less likely that official creditors will support Greece irrespective of whatever happens in Sunday's referendum, reported AFP.

The one-notch cut took Greece's rating to just two steps above "default", and announced after both the expiration of the country's European Union (EU) bailout programme without a replacement on Tuesday, and Athens's default on its debt to the IMF.

Greece and official creditors are now waiting for the results of the upcoming referendum on accepting a recast EU rescue plan. However, Moody's said the referendum "adds a further, more acute, risk to private creditors."

"Moody's believes that without ongoing support from official creditors, Greece will default on its privately-held debt," AFP reported, quoting the ratings agency.

The agency said it will review the outcome of the referendum for a possible further downgrade, with the next step being "Ca", indicating "default imminent."

Meanwhile, a "no" vote on Sunday, Moody's said, "would likely to increase the risk of exit from the Euro area which would impose significant losses on private sector creditors".

The rating agency downplayed the prospects of a new deal between the country and creditors, even as the two sides continue to entertain new proposals.

Recent events "have illustrated the distance between what Greece's official creditors will demand as a condition of continued support over the coming years, and what Greece's institutions are able to do to meet those demands with further meaningful economic and fiscal reforms."
(Image: Reuters)