Greece rejects Moody’s rating of its bonds

ATHENS/BRUSSELS - Greece Tuesday rejected as unjustified a decision by Moody’s rating agency to downgrade the country’s sovereign rating to “junk” status.

“The downgrade of Greek government bonds does not reflect in any way Greece’s progress over the past months, nor does it reflect the potential created by the country’s effort of fiscal consolidation and increase competitiveness,” the Finance Ministry said in a statement.

The ministry insisted its budgetary measures “show that the programme that Greece has agreed on with the European Commission, the European Central Bank and the International Monetary Fund is on track”.

Moody’s said it dropped its rating for Greece by four notches from A3 to Ba1 on concerns about how Athens can repay its debts.

In Brussels, a spokesperson said the European Commission “in general” does not comment on calls by credit rating agencies but stressed that the austerity measures enacted by Greece under EU and IMF supervision are “solid and credible”.

“I will let you do the comparison with all the other commentary…for us there is no change in the situation in Greece,” Olivier Bailly told reporters.

The downgrade comes just as officials from the European Union, International Monetary Fund (IMF) and the European Central Bank were in Athens conducting a review of Greece’s finances and reforms to determine whether the debt-ridden country is meeting its economic targets.

Greece is trying to shore up it public finances and meet tough fiscal targets agreed upon with the IMF and its eurozone partners in exchange for a 110-billion-euro ($134-billion) emergency package to tackle the fiscal crisis, which has spilled over into eurozone countries such as Spain and Portugal.

The 22-member team of foreign officials are holding meetings with finance, health and labour ministry officials as well as with Bank of Greece Governor George Provopoulos.

Experts will check to see if there is any danger that a series of factors, such as hospital debts, companies’ value-added tax returns, the funding of the social security fund or the imbalanced budgets of public utilities could lead to Greece failing to make needed savings.

Athens has promised to push through deficit-reduction measures, totalling 45 billion euros, over the 2010-2013 period.

It is aiming to shrink its budget deficit by slashing pensions and public sector salaries as well as attracting foreign investment.

Greek officials have said that the country has weathered the worst of its debt crisis and that Athens’ efforts remain on track.

Deficit-cutting targets were exceeded for the first five months of 2010 as a lower-than-expected increase in revenues was offset by higher spending cuts.

Another inspection visit is expected at the end of June, when Greece will receive its second batch of bailout funds totalling 9 billion euros. EU and IMF officials have said the release of the funds will depend on the successful implementation of the austerity

package.

European Union policymakers and investors are closely monitoring public reaction amid concerns that large-scale social unrest could prevent the government from pushing through tough measures.

The majority of Greeks are growing increasingly pessimistic about the future of the country’s economy, with more than 70 percent fearing more painful reforms and social unrest.

Labour unions have staged repeated strikes and protests these past few months against the planned austerity measures, which include salary cuts, tax hikes and pension reforms.