GREECE: Moody`s Downgrades Greece`s Government Bond Rating to Caa2 from Caa1

Tuesday May 5 2015

Moody`s Investors Service has downgraded Greece`s government bond rating to Caa2 from Caa1. The short-term rating is unaffected by this rating action and remains at Not Prime(NP).The outlook on the rating is negative. Moody`s government bond rating applies to debt issued on private sector terms only.

This rating action concludes the review for downgrade that commenced on 6 February 2015.

The key drivers behind the downgrade are :

1. The high uncertainty over whether Greece`s government will reach an agreement with official creditors in time to meet upcoming repayments on marketable debt.
2. The significant implementation risks of a follow-up, medium-term financing programme even if an agreement is reached, given the weakened economy and a fragile domestic political environment.

The negative rating outlook reflects Moody`s view that the balance of economic, financial and political risks in Greece is slanted to the downside.

Concurrently, Moody`s has lowered the country`s local- and foreign-currency bond ceilings to B3 from Ba3, which reflects the increased probability that Greece may exit the euro area in the event of a sovereign default.

In addition, Moody`s has also lowered the local- and foreign-currency bank deposit ceilings to Caa3 from Caa1 to capture the heightened risk of a deposit freeze, if depositor confidence weakens further. The short-term local- and foreign-currency bond and deposit ceilings remain Not Prime (NP).

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