Greece must implement plans ‘as promised’ - Moody’s
Moody’s Investors Service said it may lower Greece’s credit rating if the government fails to implement its deficit-cutting plans "exactly as promised."
The rating could stabilize at A2, which Moody’s cut it to on December 22, if all the announced deficit measures are fully implemented, the company said in a report today.
If implementation falls “just short” of pledges, the company may cut the rating to A3 in coming months and “partial implementation” may lead to a drop to Baa1, Moody’s said.
Prime Minister George Papandreou has pledged to get the euro region’s largest budget deficit under control by freezing wages and reducing benefits.
Bonds have slumped in Greece and the euro area’s southern edge as investors scrutinize budget shortfalls across the euro zone.
Moody’s, which rates Portugal Aa2 and Spain Aaa, said the three southern countries should not be grouped together.
“Market concerns regarding Greek public finances have again spilled over to Portugal and Spain, although neither country’s fiscal situation presents the depth of the challenges faced by Greece,” Moody’s said in the report.
Spain’s 2010-2013 budget stability plan is a “credible exit strategy” and, considering other previously announced plans, Moody’s is supportive of the country’s Aaa rating.
“We see liquidity risk to be negligible in the case of Portugal and even more so in the case of Spain, both of whose situations are in our view not directly comparable to that of Greece,” Moody’s said.