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Moody’s axe on Greece’s ruins

· Greece’s credit rating cut by three notches ·

For Greece, mala tempora currunt . Moody’s agency has announced a ratings cut of three notches – from Caa1 to Ca – on local and foreign-currency bonds. The decision came in the light of the aid package approved last week by members of the eurozone, which contains measures that imply “substantial economic loss” for private creditors.

For Moody’s, the international rescue program for Greece, “implies that the probability of a distressed exchange and hence a default on Greek government bonds is virtually 100%.”

Moody’s recognizes that the aid package should, “increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden."

In addition, Moody’s notes that, "The support package for Greece also benefits all euro area sovereigns by containing the severe near-term contagion risk that would likely have followed a disorderly payment default on existing Greek debt." Nonetheless, Moody’s concludes, Athens, "will still face very significant implementation risks to fiscal and economic reform.”

Meanwhile, after a weekend break following Thursday’s summit, the Greek government reconvenes today. Prime Minister, George Papandreou, has scheduled a series of meetings with opposition leaders to inform them of the decisions made during the summit, and Wednesday the parliamentary group, PSOK, the governing party, will meet and the next day – upon the return of Finance Minister, Evangelos Venizelos from the United States – the Council of Ministers is scheduled to meet. According to Greek press, Papandreou has written a letter to all government ministers requesting an intensification of efforts, without wasting a day during the summer holidays, to put into practice the decisions made in Brussels and naturally, the realization of the economic medium-term program.

Last Thursday, the European Union summit reached an agreement for 160 billion. But as analysts stated, the decisive move was not made: the proposal on Eurobonds is still on the table.

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St. Peter’s Square

Oct. 20, 2019

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